January 29, 2020

Commodity Prices and Livestock Inventories

On Friday, the U.S. Department of Agriculture’s National Agricultural Statistics Service (NASS) released its monthly Agricultural Prices report.

In part, the update pointed out that, “The corn price, at $7.54 per bushel, is up 40 cents from last month and 66 cents above August 2011.”

The NASS report added that, “The soybean price, at $15.90 per bushel, increased 50 cents from July and is $2.50 above August 2011.”

See related graphs from the NASS report below (click on the graphs for full view).

Meanwhile, Gregory Meyer reported last week at The Financial Times Online that, “Soyabean futures rallied to a new record high on strong US exports and the danger of further deterioration of this year’s drought-damaged crop.”

Melissa Allison noted last week at The Seattle Times Online that these higher prices are having an impact on livestock production.

Ms. Allison reported that, “The worst drought in decades is expected to reverberate in the meat-consuming public’s pocketbook, as fewer animals and more expensive feed crops rock the economics of the cattle, pork and poultry industries.

“Many are bracing for higher prices, but how high they will go remains unknown while the drought and its impact, along with other food-price variables, play out.”

The Seattle Times article added that, “A longer-term problem could be the cattle supply.

“Their numbers are already low from years of ranchers getting out of the business and a lingering drought in Texas and Oklahoma. The past 15 years have seen a 10 percent drop in the number of cattle and calves — to 97.8 million animals, the lowest in decades.”

Last week’s article noted that, “With the price of feed skyrocketing, ranchers are selling cows earlier than they wanted to avoid pouring more money into them — and increasing the supply of cattle takes longer than it does for chickens or pigs.

“Ranchers also are selling heifers for slaughter. Rebuilding the supply of mother cows will take even longer than simply raising new calves.”