Rabobank Report Shows Coming Challenges for U.S. Cattle Feeders

The Rabobank Food and Agribusiness Research and Advisory group released a new report about how the availability of cattle for shipment is expected to post a steep decline this year – leaving the U.S. cattle feeding industry looking for ways to make up for the reduced supply. Over the last two to three years – record high feeder and calf prices in the U.S. factored into a surge of exports to the U.S. – according to Food and Agribusiness Research and Advisory Vice President Don Close. He says the severe drought in 2011 specifically prompted a notable increase in exports to the U.S. – making levels unsustainably high.

Mexico has become an aggressive exporter of feeder cattle to the U.S. during the past 30-years – and the U.S. has relied on these imports to supplement supply. Going back to the 1980s – Close says the U.S. would usually get five-percent of the Mexican calf crop – and that shipment was nothing more than a residual of the Mexico market. However – as time has passed – Mexico has become an increasingly sophisticated and much-needed supplier network to the U.S. and Southern Plains cattle feeding industry. At the end of 2012 – Close says 10-percent of the cattle on feed supply in the entire U.S. was of Mexican-origin. It’s even jumped to 25 and 27-percent of the total cattle on feed in the TCFA area and Arizona and California because of the freight advantages. With lowest calf crop since 1958 and that share of Mexican cattle – he says the U.S. is looking at some very serious contraction of available supplies.

Close says cattle feeders are going to need to change several aspects of how they procure cattle – beginning with becoming more dependent on feeders from the southeast cow-calf complex. Overall – he says southern U.S. cattle feeders will be forced to look further north and be more price-competitive in the central and western U.S. – in spite of a freight disadvantage. Since the U.S. cow-calf herd is at a 50-year low – Close says new competition is likely to force feeders with weaker supply sources or weaker operating finances out of the market. He says it can also be expected that U.S. cattle feeders will be required to return to Canada for available feeder cattle numbers.

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