Cattle Supply is Shrinking

Fewer cattle are being placed in feedlots.

Friday's USDA Cattle on Feed Report indicates beef production is headed lower. The number of cattle and calves in feedlots this month was 4% below a year ago and placements of cattle into feedlots in May was down 12%. There are several possible reasons for the decrease according to USDA livestock analyst Shayle Shagam.

"One of which is we are likely looking at a smaller number of cattle outside of feedlots so the supplies in general are getting tighter," Shagam says. "Also you've had good grass in a number of areas in the U.S. Given current corn prices, given current feed prices, there's probably a move towards keeping cattle on grass longer to bring them into feedlots at heavier weights to offset some of the costs of feeding for a longer period of time."

Shagam expects strong steer prices this year in the low $90 a hundredweight range before increasing in 2009 as beef production will likely be reduced.

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