CHICAGO, Ill. – There is a record large number of cattle in American feedlots, and that supply, coupled with an expected drop in consumption, should push cattle prices lower in the fourth quarter, say livestock analysts.
On Sept. 21, the U.S. Department of Agriculture reported that as of Sept. 1 there were 9.393 million head of cattle in U.S. feedlots in the seven major cattle states. In addition to being a record, that supply is up five percent from a year ago.
A five percent increase had been expected by analysts, which normally would mean little market impact. However, that supply combined with an expected slowdown in beef consumption because of the terrorist attacks on Sept. 11 will likely push cash cattle prices lower, analysts said.
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“The attack is going to drop the whole price structure $2 to $3 through the end of the year,” said Ann Barnhardt, livestock analyst with HedgersEdge.com LLC. “The restaurants are suffering terribly. People just aren’t going to be consuming as vigorously as we had hoped.”
Before the Sept. 11 event, Barnhardt had expected fourth-quarter cash cattle prices to bottom near $68 US. Now, she sees a bottom at $65 to $66.
Cash cattle in plains feedlot markets traded at $67 to $68 last week, down from $70 a week earlier.
Other numbers in the cattle-on-feed report were close to trade estimates.
USDA reported August placements were 91 percent of a year ago, down slightly from the average trade estimate of 93.1 percent.
August marketings in the report were 98 percent of a year ago, down from the average trade estimate of 99.2 percent.
While the report’s numbers were close to trade estimates, analysts said the cattle market will likely be affected by declines in beef demand.
Before last week, Chuck Levitt of Alaron Trading Corp. expected fourth-quarter cattle prices to range from $68 to $72. Now, because of the attacks and their potential impact on beef demand, he said the range could be $66 to $68.
“The ballgame has changed because of the demand side of the market,” he said.
