August 6, 2015
Momentum of US cattle rebuild challenged by lower futures
It remains to be seen whether the US could successfully rebuild its beef cattle, despite the optimism expressed by Donnie Smith, the chief executive of Tyson, over the biggest increase the herd is likely to undergo since the early eighties.
This is, at least, according to Chris Hurt, a professor of agricultural economics at Purdue University, who attributed the uncertainty towards a negative trend of futures for live cattle which declined by more than 10% from an April high. The drop hit 147.90 cents a pound in Chicago for the spot August contract.
Hence, Hurt expects the appetite for herd expansions will not be as enthusiastic as the past 12 months. "Lower finished cattle prices over the coming year will put pressure on calf prices as well," he added.
Hurt also observed that the "rapid rate" of heifer retention, to support an expanding herd, may dissipate before the end of 2016. Retention, according to Smith, was 106.5% a year ago based on USDA data, supposedly the largest percentage since 1986.
In addition, the Tyson chief executive believes that the cow herd could grow to 750,000 head year-over-year, a 3% increase since 1980."Pasture conditions have recovered dramatically and are supporting the rebuilding of the cattle herd," Smith said.
He also noted that the supply of fed cattle available for the market could rise around 1.5% by 2016, based on the present volume of heifer retention.
Another positive forecast is shared by Paragon Economics and Steiner Consulting which, based on information provided by the Livestock Marketing Information Center, expects a recovery of US cattle numbers to about 100 million head by the end of the decade. The figure would be the highest in more than 20 years.