News Update

News Update
Oct. 16, 2006

Cattle supply: Fourth quarter will be key in herd expansion

James Mintert, agricultural economics expert at Kansas State University Research and Extension, says that recent trends have clouded the picture of the U.S. cattle herd, and that fourth-quarter statistics will be key to interpreting the picture.

Beef processors are counting on an expanding herd to rein in high prices and provide a larger number of younger cattle to meet demand in Japan, where prices are high, but only beef from animals 20 months or younger is allowed, Meatingplace.com reported.

A huge bump in cattle sent to slaughter in the late summer has clouded a picture of a rapidly expanding herd stimulated by high prices for cattle and calves, Mintert said. “This year’s beef and dairy cow slaughter combined total has been 10.5% higher than a year ago,” he noted. “The big rise in beef cow slaughter has stimulated speculation that the U.S. has shifted from herd expansion to herd liquidation. But is this really the case?”

He points to a jump in steer slaughter, but a decline in heifer slaughter as indicative that farmers are culling their herds of steers, perhaps due to drought conditions, while holding back heifers to rebuild the herd next year.

“So far this year, the ratio of female to steer slaughter is 0.833, suggesting that producers are still trying to expand their herds despite drought and poor pasture conditions,” Mintert said. “Fourth-quarter cow and heifer slaughter will ultimately determine what happens.”

Congress may hold hearings on Smithfield's purchase of Premium Standard

Sen. Mike DeWine (R-Ohio) plans to hold hearings concerning the purchase last month of Premium Standard Farms Inc. by Smithfield Foods Inc., Meatingplace.com reported. The $810 million deal has also attracted attention at the Justice Department, which is examining the purchase’s impact on hog prices and pork producers. The Justice Department worries that the deal will create a monopsony, or dominant buyer, in the pork market and harm small farms.

“We're sensitive to the issue” of monopsony, a Department of Justice agriculture expert told The Daily Deal, adding that the issue comes up very rarely but is taken very seriously.

— compiled by Abby White, assistant editor, Angus Productions Inc.