Weekly US Cattle Outlook - Energy Bill has to Impact Farm Markets

US - Weekly Cattle Outlook, January 4 2008 - Weekly review of the US cattle industry, written by Glenn Grimes and Ron Plain.
calendar icon 7 January 2008
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The 2007 broad-based energy bill has the potential to impact farm markets and crop production decisions for years to come.

Congress' ultimate goal is for the nation to use 36 billion gallons of renewable fuels by the year 2022. According to plans in the bill, corn-based ethanol production will peak at 15 billion gallons per year in 2015 and stay at that level. This will mean roughly doubling the current corn-based production capacity.

Building that much more corn-based production facilities is not the most challenging aspect of reaching the goal. It will be producing enough corn to keep these plants supplied without shortchanging other corn users such as the cattle industry and supplying acres to other crops.

In fact, the current mid-$4.00 per bushel corn futures price is not due to the current supply of corn based on 2007-2008 marketing year needs, but the battle for acres with soybeans for the 2008 crop year.

The cost of producing cattle will be impacted by the energy bill for years to come. Feeder cattle prices will be substantially lower with a given Fed cattle price than past history suggests. Ways of producing more beef from forages will be a part of the management strategy by cattle producers.

Cattle producers continue to cull the cow herd more than a year earlier. For the year through the week ending December 15, cow slaughter was up 6.2 percent from 12 months earlier. Cow slaughter for the year of 2007 through the week ending December 15 was up 17.8 percent from 2005. The large cow slaughter continues to be fueled by the drought that shortened ranges and pastures and contributed to high hay prices.

The odds appear quite high for a relatively small reduction in the cow herd for January 1, 2008, compared to a year earlier.

Wholesale beef prices Friday morning with Choice beef at $148.50 per cwt was down $0.12 per cwt from seven days earlier. Select beef at $137.17 per cwt was up $1.17 per cwt from a week earlier.

The weighted average live fed cattle price for the five-market area through Thursday at $94.58 per cwt was up $2.63 per cwt from seven days earlier. The weighted average negotiated carcass price through Thursday at $150.75 per cwt was up $4.35 per cwt from a week earlier.

The Oklahoma City feeder cattle auction was closed again this week for the New Year's Day holiday.

Slaughter this week under Federal Inspection was estimated at 528 thousand head, up 0.6 percent from a year earlier.

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