Corn Rally Will Lead to Beef-Price Drop, Morgan Stanley Says
US - Surging costs for feed corn will force U.S. cattle producers to sell more animals next year, resulting in record beef production that probably will send meat prices lower, Morgan Stanley said today in a research report.U.S. beef production will rise 2.6 percent, lowering cattle prices 5.8 percent in 2007, as feedlot owners in the Great Plains and Midwest states are forced to speed up the liquidation of their herds, Allidina said.
"Faced with higher production costs, livestock producers will increase slaughter rates in an effort to contain costs, resulting in an increase in supply, sending prices lower,'' Allidina said in the report.
Average cattle futures on the Chicago Mercantile Exchange will fall to 81 cents a pound in 2007 from an estimated 86 cents in this year and a record 87 cents in 2005, Allidina said. Beef production will rise to a record 26.891 million pounds from an estimated 26.215 million this year, overwhelming packer capacity, he said.
Source: bloomberg.com