US cash cattle prices surge after blizzard reduces supply

CHICAGO, March 1 Fri Mar 1, 2013 4:51pm EST

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CHICAGO, March 1 (Reuters) - U.S. cash cattle prices jumped this week, posting their biggest increases in a year after blizzard conditions in the southern U.S. Plains reduced the amount of market-ready animals and slowed deliveries to packing plants, traders and analysts said on Friday.

Live steer and heifer prices increased $5 per cwt in the top cattle producing state of Texas, the largest increase since February 2012. That is expected to push wholesale beef prices higher and could further reduce already lackluster consumer demand for red meat.

Beef packers, caught short amid the snowfall, aggressively hiked their bids to buy cattle. Prices in the Texas Panhandle surged to $128 per cwt and Kansas cattle gained $3 to $127, with cash prices overall the highest in about two months.

Retail beef prices are the highest ever, rising to $5.24 per lb for benchmark choice cuts in January, according to the U.S. Agriculture Department.

The highest gasoline prices since the end of last summer and the steepest drop in consumer income in 20 years have also pressured demand at butchers and grocery stores even as uncertainty surrounding budget and job cuts due to the so-called sequester keeps a lid on beef buying.

"The overall economy is looking uneasy and that's not good for meat demand," said Ron Plain, an extension agriculture economist at the University of Missouri.

Still, beef prices are underpinned by the smallest U.S. cattle supply in 61 years after the worst drought in five decades led to record-high animal feed prices, leading some cattle producers to liquidate their herds.

The blizzard that dumped 20 inches of wet snow this week in the Plains cattle country mitigated drought conditions but stressed animals in pastures and feedlot fattening operations, slowing weight gain. Feedlot operators also struggled to load animals in trucks and transport them to slaughter houses.

"It was hard for the feedlots to get the animals to the packing houses. You're dealing with 2 feet of snow out there in the country. That's hard conditions to get semi's out on country roads," an Iowa cattle broker said.

Meat companies, such as Tyson Foods Inc and Cargill Inc, are likely to pass the higher cattle prices onto consumers. Beef packers, on average, are losing $23.40 per head of cattle they slaughter, according to the advisory service HedgersEdge.

Plain, the economist, expects another record retail price for beef. "I don't think the record (in January) is going to last for the year," he said.

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