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Drought Continues to Overshadow Cattle Market

August 20, 2012
By: Kim Watson Potts, Beef Today
 
 

Drought conditions continue to overshadow cattle prices as producers struggle to maintain herds, with many forced to sell off cows and calves. Cattle-Exchange's Frank Loschke says "Transferring ownership for one or two years might be something to consider if we want to preserve our genetic legacy in our cow herds.  Weather permitting; we can repurchase some of those genetics back."

Fortunately, there may be a break in the weather for some in the coming weeks. USDA's weather forecast for the coming week shows near- to above-normal rainfall across most of the nation in contrast with drier-than-normal conditions across the central and southern Plains and the Northwest. Over the weekend some areas in in Indiana and Ohio received rain, but even with some moisture, it will take a while for pastures to return.

"Some producers are nearing a breaking point when it comes to being forced to send cows to market due to a lack of feed, while others are continuing to hold out hope for some fall pasture growth to prevent a large liquidation. Beef cow slaughter has trailed year ago levels throughout 2012 to this point, but this will change very soon without meaningful rain and pasture growth," according to University of Missouri economist Scott Brown and Ron Plain in their weekly cattle outlook report.

Plain and Brown also say that the August live cattle futures contract settled at $120.70/cwt, virtually unchanged from the previous Friday. The October contract settled at $125.30/cwt, down $0.20. December closed at $128.225/cwt, down $0.20 from the previous Friday. August feeder cattle futures ended the week at $140.60/cwt, $1.125 higher than last Friday. October feeders ended the week at $143.70/cwt.

Higher cattle prices are starting to translate into higher beef prices. The Bureau of Labor Statistics recently reported that ground beef prices in July averaged $3.09/lb.-- a record for ground beef. Economist say as beef prices climb we may see consumer demand decline as other protein sources become more economical compared to beef. And with cattle and beef supplies continuing to shrink, it doesn't appear that there will be any long term reducted in beef prices, only temporary declines as producers are forced to cull herds and send cattle to slaughter.

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RELATED TOPICS: Beef, Marketing, Cattle

 
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