UPDATE 3-U.S. cattle supply largest in four years

Fri May 20, 2011 6:36pm EDT

Related Topics

 * May 1 fed cattle supply largest since 2007
 * New placements second-highest on record
 * Beef in storage highest for the month in at least 10 yrs
 * Bigger supply good for beef plants, retail relief slow
 (Rewrites first paragraph, adds analysts comments, byline)
 By Bob Burgdorfer
 CHICAGO, May 20 (Reuters) - The number of cattle being fattened for beef rose by more than
expected last month while meat in cold storage surged, data showed on Friday, as a severe Southern
drought forced ranchers to sell stock quickly.
 Live cattle prices LCc1 are likely to fall on Monday, extending a 15 percent slide since they
hit a record in early April.
 That could in turn help cool world food prices that are hovering near record highs, stoking
concerns about accelerating inflation and unrest in poorer countries.
 The increase in cattle has been widely attributed to droughts in Texas, Oklahoma and Mexico
that forced cattle off of pastures and into feedlots. That should mean ample cattle for beef
packers like Tyson Foods (TSN.N) Inc, JBS SA (JBSS3.SA), and Cargill Inc CARG.UL.
 "We just confirmed that we will have big numbers ahead and that is good for the packing
plants," said Don Roose, analyst at U.S. Commodities Inc. "We have more beef and pork in storage
than a year ago and we have more beef coming at us."
 Graphic: r.reuters.com/kaf69r
 The U.S. Agriculture Department on Friday reported 11.2 million cattle in feedlots on May 1,
the most for that date since 2007. That is up 7 percent from a year ago, and more than the 5
percent increase that analysts had expected.
 PLACEMENTS SECOND HIGHEST ON RECORD
 Placements, or the number of young cattle sent by ranchers to the feedlots where they are
fattened for slaughter, rose 10 percent from a year ago to 1.795 million head. That is
second-highest placement number on record and the 10 percent increase was double the 5 percent
increase analysts had expected.
 "It appears the weak forage conditions in the Plains and record high live cattle prices
provided added incentive," said Rich Nelson, analyst at Allendale Inc.
 Monthly cattle placements have been above a year ago every month but two in the past year. The
increases have surprised analysts as they are occurring despite the smallest U.S. cattle herd since
1958.
 "There has to be a limit to the number of feeder cattle we can import from Mexico." said Doug
Houghton, analyst with Brock Associates.
 In a separate report, the USDA said said that 442.8 million pounds of beef was in storage at
the end of April, up 20 pct from the 369.5 million a year earlier. Pork supplies were 545.8 million
lbs, up 13 percent from a year ago.
 PRICES EASING
 Cattle prices have been declining since early April when they set record highs of more than
$120 per 100 lbs, and Friday's report should keep prices going down.
 Cattle traded this week at $108 and could trade $2 lower next week and eventually bottom near
$100, said Roose. In the futures market, the biggest losses next week will likely occur in the
deferred contracts, because the large placements, will mean more cattle later this year.
 Wholesale beef prices also have been going down, pressured by the larger cattle supply, more
beef in storage, and slowing domestic demand. The prices topped $190 per hundredweight in April,
but have since slipped to about $175, analysts said.
 Since meat companies and supermarkets have been slow in passing on the higher beef prices to
consumers, it may take time before retail beef prices decrease, said Houghton.
 "I don't think it will provide any significant relief in prices but it should prevent any
further increase in retail beef prices," Houghton said of retail beef prices.
 (Additional reporting by Theopolis Waters; Editing by Dale Hudson and Sofina Mirza-Reid)







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