March 30, 2011 Rolling Plains Sending more beef to Market
According to the current CME livestock report drought conditions in the Southern Plains have worsened in recent weeks and this has led to speculation that it will tend to push more beef cows to market
For buyers of lean processing ground beef this would be good news given record high lean beef prices and lack of imported supplies. For those looking at the longer term trends in beef production, however, the drought means further delays in turning the cattle cycle and bringing more beef supplies into the marketplace.There is no question that drought conditions in Texas and surrounding states are quite severe (see chart) and much worse than in the last two years. So far this has had little impact on US beef cow slaughter rates.
The map to the right offers somecontext as to the overall availability of cows from various parts ofthe US. The four outlined areas in the map show that 85% of allbeef cow slaughter in the US comes from four regions (as definedin the USDA regionalization plan). The percentages besides thenotation of each region reflect the normal contribution to annual US slaughter. US beef cow slaughter for the last four reported weeks was 249,500 head, 12,100 head or 5% lower than a year ago.Beef cow slaughter in region 6, which has borne the brunt of the drought, was reported to be 67,000 head during the reference period, 9,200 head or 16% higher than a year ago. So the drought is having an impact there. However, slaughter rates in region 5 were down 16,400 head during this period, a 25% decline from a
year ago. Why the decline in region 5? Higher feeder cattle prices clearly are a factor but we think that the decline in cow slaughter for region 5 is also due to fewer Canadian cows coming to the US.
Indeed, during the same reference period, US imports of Canadian cows were 12,958 head, 7,075 head or 35.3% less than a year ago.Overall, the drought is pushing a more cows into the market in Texas and surrounding areas but declines in other parts of the country have more than offset the drought impact…so far. Pasture conditions this summer will be a particular concern since they impact the ability of producers to secure enough feed. Combined with high grinding beef (and thus high cow carcass values), this could make it difficult to halt the beef cow herd liquidation. The drought also will remove one source of profitability from beef producers, namely their ability to put more pounds on cattle outside of feedlots. This is particularly important in an environment of high grain prices. Drought has pushed light calves onto feedlots in recent months and that trend is likely to continue this spring and summer.
To see charts click here stuff