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Cattle flood livestock markets in 2009
Wilson County News
September 1, 2009 | Comment on this article
Readers of the weekly “Texas Department of Agriculture Market Recap” may have noticed the Aug. 24 report that states, “Feeder cattle price trends at Texas auctions were mostly steady to $5 higher with a few drought areas being steady to $3 lower.” This followed last week’s report that stated the feeder cattle were $4 higher, with drought areas mostly steady to $4 lower.
Veronica Obregon, chief communications officer with the Texas Department of Agriculture, explained that the increased number of cattle being sold in the market is contributing to the lower prices reported by the auction barns.
The current economic recession which, in turn, causes a lower beef demand,
is just one of the factors causing the downward trend in beef prices, Obregon said. Two other factors are the drought and the dairy buy-out.
The lingering 23-month-long drought has forced ranchers in the area to either reduce or completely disperse their herds. The lack of forage and drying of stock tanks used as sole sources of water for the cattle are prevalent in the area.
The latest estimated numbers given for drought loss in the livestock industry in Texas detail the severity of the 2008-09 drought. Recent estimates given July 20 by economists of the Texas AgriLife Extension Service list losses at $974 million since November 2008.
The increase in cattle being sold is evident by looking at two local auction barns, the Nixon Livestock Commission Inc. in Nixon and the Atascosa Livestock Exchange in Pleasanton.
Nixon Livestock Commission Inc. numbers for the past month have averaged 2,190 head of cattle for the month of August. This compares to last year’s average of 1,000 head sold for the month. On Aug. 12, 590 cows and 23 bulls were sold, with an additional 370 cows and 36 bulls sold the following week.
The Aug. 19 report from the Atascosa Livestock Exchange had 1,460 cattle and calves sold, compared to 1,043 sold the week prior, and just 487 one year ago.
Another factor that is sending additional cattle to the market is the eighth dairy herd buy-out.
Cooperatives Working Together, an association of dairy cooperatives, is currently conducting the third herd retirement in the last nine months. In this round, 86,710 cows will be accepted.
“The dairy cow buyout will further increase the number of cows sent for processing,” Obregon said. “All cows retired under the program must be processed to assure that they are permanently removed from dairy production.”
Stocker cows in good condition are being shipped to other areas within the state, Obregon said.
“Ranchers from other areas that have received rain and have grazing are still buying cows that are in good condition with several years of productivity remaining,” Obregon said. “However, there are also quite a few cows in poorer condition coming to sale that are being bought for processing. As more cows come to the sale, prices have gone down. On average, current prices for process cows are about $10 per hundredweight lower than they were at this time last year.”
Obregon said that 6.2 million cows were processed in 2008. The 2009 buyouts will increase the number of processed cows by 3 percent.
The Texas Department of Agriculture reporters who visit local auctions are also seeing cattle in poorer condition, because of the lingering drought. In turn, buyers are paying less for the thinner cows, “so they offset the lower dressing percentage,” Obregon said.
Obregon points out that other declines are also being seen in the cattle market. Prices paid for feeder steers are down about $6 from a year ago, and fed cattle coming out of Texas feedlots are down almost $18 per 100 pounds.
Feedlot operators are receiving prices of $81.95 per hundredweight versus $99.85 last year, or $225 less for a 1,250-pound steer.
The news that the 2009 U.S. corn crop is reported to be the second-largest on record has given feedlot operators “some leeway to pay more for feeder cattle than they would have otherwise,” Obregon said. The price of corn was listed at $3.18 per bushel, compared to $5.22 one year ago.
“Economists expect cattle prices to be higher in 2010 than they are in 2009, because of few supplies of cattle and improved demand for beef associated with an expected economic recovery,” Obregon said.
This report is based on U.S. Department of Agriculture reports that the current feedlot inventories are lower compared to a year ago, with U.S. feedlot inventory down 5 percent and Texas feedlots down 6 percent.
The U.S. placements of cattle on feed during June were down 8 percent from a year ago and Texas placements were down 17 percent. |
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