Heavy placements of cattle on feed portend future beef production

The USDA's latest Livestock, Dairy and Poultry outlook reports that during the first half of 2011, net placements were 2 percent above placements for the first half of 2010 as drought has pushed cattle off pastures in many parts of the country, and most of these feeder cattle have gone into feedlots. This increase occurred despite relatively high corn prices and almost 4 percent fewer feeder cattle outside feedlots. With almost 4 percent more cattle in feedlots of 1,000 head or more capacity, marketings will remain above year-earlier through the third quarter. However, as marketings begin to decline in the fourth quarter, beef production will begin to decline.

While the direction prices will take over the next few months is uncertain due to heavy marketings of fed cattle, retail beef prices are likely to increase over the next several years as beef cow inventories are rebuilt and more heifers are kept for herd building and diverted from placement in feedlots. How high retail prices go will depend on the economic recovery, retail prices of pork and poultry, how rapidly exports increase, and how rapidly beef cow inventories are replenished.

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