Beef Sector Sees Lower Returns and Margins Despite Smaller Inventories

Lower cattle numbers are not producing higher prices.

Friday's USDA Cattle on Feed Report showed cattle and calves in feedlots down 6% from last year and placements in feedlots down 5% from a year ago. Smaller numbers are not adding up to higher prices and according to USDA livestock analyst Shayle Shagam, everyone in the beef industry is hurting as far as returns are concerned. Average prices for steers are $10 to $15 a hundredweight less than a year ago.

"Part of it of course being that there is concerns about the economy; there is concern on the part of retailers on whether or not they can move that product," Shagam says. "As a result, they are being a little bit more nervous and being a little bit more cautious in terms of their buying habits, until the holiday season comes past and they can probably reevaluate what's in their inventories."

Shagam says also chicken is very plentiful and very cheap, which is working into the system in terms of demand pressure on the beef side. This all spells lower prices for everyone from the cow-calf producer to the feedlot to the processors.

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