State of the 2012 cattle industry

by Dan Childs

The cattle industry is experiencing both production and market conditions that are unique and uncommon for the industry. Extreme heat and drought conditions in 2011 caused double digit percentage declines in beef cattle numbers in Texas and Oklahoma. In 2011, there were 660,000 head of beef cows that disappeared from Texas making it the largest single-year decline in history. Oklahoma producers reduced their herds by 288,000, dropping its rank in total beef cows in the U.S. from second to fourth behind Texas, Nebraska and Missouri.

On the other hand, many northern states experienced good growing conditions in 2011, allowing them to increase beef cow numbers. This helped soften the year-over-year decline of total beef cows in the U.S. to 3 percent. The good summer in some of the northern states also allowed them to produce and ship hundreds, if not thousands, of truckloads of surplus hay to the Southern Great Plains. Even at unprecedented high prices, southern producers were glad that hay was available. Even though Mother Nature dealt the Southern Great Plains a harsh summer in 2011, she has provided a mild winter through January that has helped stretch sparse hay inventories.

Somewhat surprisingly, cattle prices have remained strong despite the large numbers moving through the market. November 2011 prices for all cattle experienced more than a 25 percent increase over November 2010. Lightweight calf prices are at record levels causing “sticker shock” for buyers. Many producers are asking how high prices can go before consumers start to reduce beef purchases. The Consumer Price Index calculated a 10 percent increase in beef and veal prices from November 2010 to November 2011. Based on preliminary data reported by the University of Missouri, beef demand was up 4 percent in December 2011 compared to December 2010 and up 1 percent for all of 2011. This increase in overall demand follows three years of declining domestic beef demand. However, preliminary data for the fourth quarter of 2011 indicates that beef exports are expected to be over 10 percent higher than in 2003 (prior to BSE) and about 21 percent higher than in 2010. The weak U.S. dollar has contributed to stronger exports.

Beef production will be impacted for several years by the 2011 drought. The 2012 year-over-year decline in beef cows of 3 percent will result in the smallest calf crop since 1950. Smaller cattle numbers in combination with increased demand both domestically and internationally set the stage for a strengthening of prices. A surprising number in the Jan. 1, 2012, cattle inventory report was a 1 percent increase in beef replacement heifers relative to the previous year. This is an indication that the industry wants to increase herd numbers.

Overall, the future is bright for the cattle industry; however, many challenges persist. First, higher cattle prices typically translate into greater risks, thus making risk management strategies more important for producers. Second, input prices are likely to continue to rise. Managing costs, therefore, will be essential for profitminded producers. Lastly, government policies can materially affect farming and ranching operations, so it is important that producers become (and remain) politically engaged. Those who engage their political representation and manage production and market risk should prosper in the next few years.

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Beef-Demand Building Efforts To Increase

by TheCattleSite

US - Increases in support for beef demand-building efforts were approved by directors of the Federation Division of the National Cattlemen’s Beef Association (NCBA) at the organisation’s Board meeting held last week in conjunction with the 2011 Cattle Industry Summer Conference in Kissimmee, Florida.

Additional funding will go to programmes funded through the Beef Promotion Operating Committee (BPOC) and a special Federation Initiative Fund that channels money from states with large cattle populations to those with large consumer populations.

Federation directors voted to allocate $750,000 in expected surplus Federation funds to supplement the funding requests that will be considered by the BPOC in September. The BPOC determines national and international programmes for building beef demand. The funds are invested by state beef councils and are in addition to a $5.13 million initial FY2012 investment approved by the Federation Executive Committee and Federation directors.

According to David Dick, a beef producer from Sedalia, Missouri, and chairman of the NCBA Federation Division, the additional funds will be put to good use. “Matched with funds from the Cattlemen’s Beef Board (CBB), this money will support demand-building programmes that benefit US beef producers,” he said.

“It’s important that we put the money where it will do the most good.”

In that spirit the Federation also approved $198,300 in spending on demand-building projects through its Federation Initiative Fund. A total of $246,550 had been requested from the fund by 10 state beef councils in large consumer population states. The fund is made possible by state beef councils that have more cattle than people.

“Producers on state beef council boards across the country control half of the one dollar mandatory national beef checkoff they collect,” said Mr Dick. “While most of that money is used for in-state demand-building programmes, we’re also able to strengthen the national programme and get other funds where they’re needed badly.”

The NCBA Federation Division represents the 45 Qualified State Beef Councils, and elects 10 members to the 20-member BPOC. The other 10 are elected by the CBB. The BPOC determines which projects and programs will be funded through the 50 cents of each checkoff dollar sent to the CBB.

Other Actions

Also at the Summer Conference, Federation directors heard more about progress made through a Charter they approved at their meeting in Denver in February. The Charter establishes that the Federation is independent within NCBA.

Among the steps taken since February have been the hiring of a senior staff member whose sole responsibility is Federation activities, and the hiring of a compliance officer who helps assure that time and expense controls of Beef Checkoff funds are properly implemented.

“As a committed partner with CBB, we want to make sure that we have 100 per cent accountability,” said Mr Dick. “At the same time, we value the synergies that our association with NCBA provide.”

At the event’s Federation Forum state beef council representatives presented ways the Federation was involved with programmes taking place in their states. Staff from the Idaho Beef Council utilised Federation assistance in a state-initiated consumer promotion project, while the Nebraska Beef Council provided significant assistance in a nationally-developed Issues Management programme in Nebraska.

“State beef councils and their staffs are key to the Federation’s success,” said Mr Dick. “Not only do they financially support national Federation efforts, they directly participate in Checkoff-funded efforts taking place in their states. It’s a close relationship that works well.”

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Cattle futures defy weight of data to pare losses

by Agrimoney.com

Has a matter of size trumped a numbers question?

Cattle futures staged a surprise rebound on Monday despite a barrage of apparently bearish data showing a bigger US herd than had been expected – with the revival attributed by some to potentially smaller animals.

Both feeder and live cattle opened weak in Chicago, running to traders' script after a key US Department of Agriculture report showed the US herd - while dropping this month by 1.1% to 100.0m head, its lowest on record - had not fallen as far as analysts had expected.

The market had forecast a decline of some 315,000-head more, to 99.7m animals.

The number of cattle in feedlots was especially strong, a separate report showed, lifted by placements which rose 4.0% last month – in contrast to the slide of 6.6% that traders had expected.

"The ongoing drought in the south west appears to have forced more cattle off the range" and into feedlots, Jon Michalscheck at Benson Quinn Commodities said.

'Somewhat bearish'
The feedlot data were deemed especially bearish for nearer-term contracts, implying a jump late in the year in supplies of live cattle - fattened animals ready for slaughter.

"This ought to affect the October, December timespan," Mike Mawdsley at Market 1 said.

The inventory report echoed the dynamic in showing a calf crop of 35.5m animals, some 350,000 head higher than analyst estimates, implying a near-term boost to cattle numbers, but a beef cow herd which fell well short of expectations, indicating a diminished breeding herd ahead.

"In the short-term, the report could be construed as somewhat bearish for cattle prices," a report from Paragon Economics and Steiner Consulting said.

"The much larger [than expected] calf crop is bearish in the short term."

Heat stress

However, after a weak start, and poor sentiment in crop markets, both near and far-term futures in both live cattle and feeder cattle recovered most of their lost ground, to bring some lots back into positive territory in late deals.

"It is a little bit surprising. Futures could not stick it to the downside," Don Roose, president of broker US Commodities, said.

He attributed the resilience in part to prices in the cash market, which traded at $108 a hundredweight last week. "We do not know how this is going to do this week," Mr Roose said.

Furthermore, there was some evidence that weights may be coming down, limiting the impact of higher animal numbers in raising beef supplies.

Besides the impact of high corn prices in reducing feedlots' appetite for fattening cattle to the limit, Mr Roose noted a side effect of the heatwave in southern states home to one-third of the US herd.

"We spoke to one feedlot owner earlier who was wary of putting large cattle because of the risk in high temperatures.

"When you are moving a 1,400-1,500 pound steer in 105-degree [Fahrenheit] heat, that's going pretty stressful for the animal."

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Record-low cattle herd could herald profits surge

by Agrimoney.com

Data due on Friday expected to show the US cattle herd shrinking to its lowest on record could represent a marker on the road to a far more profitable ranching sector.

The US Department of Agriculture is due later, in a twice-yearly report, to show the domestic cattle herd falling by 1.4% from July 1, dropping below 100m head for the first time since the series began in 1973.

The decline is seen in part down to the sector's greater productivity since the spread of feedlots, which has allowed producers to shorten fattening periods while increasing animal weights.

US producers are expected to produce some 26m pounds of beef, nearly one-quarter more than in 1973, despite a herd which has shrunk by one-quarter over the same period.

But it is also "a reflection of the fact that grain farming is more profitable than cattle ranching", Don Roose, president of broker US Commodities said.

"It has been more profitable for farmers to tear up pastures and replace them with crops."

Supply squeeze ahead?

However, the extent of the decline in the cattle herd may swing the pendulum of profitability back towards ranchers, once high beef prices persuade the industry to go back into expansion mode, a report by Paragon Economics and Steiner Consulting said.

Expectations for USDA cattle herd data, as change in year to July 1 All cattle and calves: -1.4% Cows and heifers that have calved: -1.3% (Includes beef cows: -1.9% And dairy cows: -0.1%) Annual calf crop: -1.5% Source: Dow Jones survey

The increased beef production has come against a background of population growth to 7bn people worldwide, from 4bn people in the early 1970s.

"Increasing global incomes, lower trade barriers and more fluid markets have led to ever-rising beef demand globally," the briefing said.

"All of this will put more pressure on US beef prices long term, and cattle prices will rise to points that once again make it profitable to invest in this business."

Indeed, if cattle prices appear high now - with futures in both feeder animals, ready for placement in feedlots, and live animals, ready for slaughter, within 10% or so of record highs – "they will be even higher when producers finally decide to hold back heifers for herd rebuilding".

Friday's report is expected to show the calf crop falling 1.5%, implying some 2m fewer calves produced than five years ago.

'No feed in Texas'

One factor which has held back cattle production this year is the drought in the US South which has threatened pasture on an area home to roughly one-third of the US herd.

Expectations for USDA cattle on feed data, as year-on-year change Total cattle on feed, July 1: +2.7% Placed on feedlots in June: -6.6% Marketed in June: +2.8% Source: Thomson Reuters survey

Indeed, the dryness has been seen as a major impetus behind a jump in placements, even of smaller than-usual cattle, on feedlots, until a sharp slowdown in June.

Analysts are divided over whether a separate USDA report on Friday, a monthly census on feedlots, will show buy-ins of feeder cattle remaining weak last month, or whether the dryness revived placements.

At Country Futures, Jerry Stowell, while forecasting a 10% slide in placements for June, said the number "could be up 20% for July" because of the shortage of fodder.

"There is no feed in Texas – no hay, no nothing," Mr Stowell said.

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Cattle Futures Down As Drought Continues

by TheCattleSite

US - Beef production was up slightly this week in comparison to last years levels, whilst cattle futures saw a sharp decline, write Steve Meyer and Len Steiner.

Beef production for the week rose just 0.2 per cent from a year ago, mostly due to higher cow slaughter levels.

Nevertheless, cattle futures declined sharply this week as market participants fretted over the impact of extremely hot weather on beef demand as well as the pace of cattle auction sales.

Faced with deteriorating pastures and high feed costs, cow-calf operators have been trying to push more feeders into feedlots.

The nearby feeder cattle futures contract (August) lost almost eight dollars per/cwt or 5.5 per cent last week.

Nearby live cattle futures also declined by almost 400 points for the week.

The beef cutout actually managed to gain modestly from the prior week but the heat wave and surging cash corn values were seen as short term negative for feedlot sales.

As the heat wave spreads across multiple states, keep an eye on hog and cattle weights and the resulting impact on overall protein supplies.

On Friday, CME issued a special executive report noting that due to “a prolonged lack of trading volume and after significant discussion with industry participants, CME will be delisting Frozen Pork Bellies Futures and Options effective Monday, 18 July, 2011.”

Many agricultural futures contracts, including hogs and cattle, have been extremely successful in recent years as evidenced by the steady increase in open interest volume.

The delisting of the belly contract shows that, in the end, futures contracts needs to strike a delicate balance between hedgers and speculators.

The frozen pork belly contract was no longer seen by end users as an effective hedging instrument, particularly given the shift towards using more frozen bacon.

Also, the seasonality of pork belly prices no longer is what it used to be, with bacon becoming a staple of foodservice menus year round.

As a result, the industry found the frozen belly contract trading between February - August as insufficient to meet its hedging needs.

The weekly production data showed only modest increases in meat protein supplies for the week ending 16 July.

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Pork prices to stay 'unusually high' as China buys

by Agrimoney.com

Hog prices are set to remain elevated, and retail pork values "unusually high", thanks to a slide-off in production at a time when demand is being stoked by China, whose own prices have hit record highs.

The US Department of Agriculture warned that expansion throughout the domestic livestock industry was "tenuous", with high grain prices to force a year-on-year drop in broiler production in the second half of 2011, while drought in the South prompts cattle farmers to slaughter cows they had earmarked for breeding from.

"The high rate of cow slaughter will likely limit calf crops for at least this year and next," USDA analyst Rachel Johnson said.

However, she highlighted in particular the squeeze facing the hog and pork markets as a fall-off in output expected to accelerate into a year-on-year decline in the October-to-December quarter, thanks to lighter animals.

'Important outlet'

"While the spring pig crop points to slightly higher fourth-quarter slaughter, dressed weights will likely average below 2010 levels, which were achieved when a combination of corn quality and optimal feeding weather boosted weight gains," Ms Johnson said.

Meanwhile, demand will boosted by exports expected to rise by 12% in the second half of 2011, fuelled by demand from China, the biggest pork consumer.

Since the lifting last year of trade restrictions on US pork, imposed following the swine flu, or H1N1, scare, "China has developed a pattern of consistent purchases of important quantities of US pork products", often ranking in weekly export data in the top five destinations for shipments.

China, already "becoming an important outlet for US pork products", was likely to see its "evolution as an export destination for US pork products… continue to evolve".

The impact in the US meant that "continued year-over-year higher hog prices and unusually high retail pork prices are the most likely outcome for second-half 2011", Ms Johnson said.

'Extreme heat'

The comments come a week after Chinese inflation data showed pork prices soaring 57% year on year, as demand for the meat in a country responsible for half world consumption far outstripped domestic supplies.

The US Meat Export Federation, an industry group, said that US pork exports to China so far this year were, at 99,400 tonnes, "comparable in volume to the record pace of 2008", besides being worth more than $150m.

Meanwhile, US Commodities also highlighted the prospect of a fall-off in hog weights, noting that they had been behind year-ago levels for seven successive weeks.

"The extreme heat in the US will help keep weights below 2010. This will offset the larger slaughter [numbers]," the Iowa-based broker said.

However, lean hogs for August delivery fell 1.5% to 97.45 cents a pound on Monday, a weak day for many commodities and other assets deemed riskier investments.

Belly flops

*Monday also brought the delisting of pork belly futures, made famous by the film Trading Places, which the CME Group scrapped following a drop in investor interest.

Trading volumes in Chicago's near-term contract had totalled two lots, both on January 25, so far this year.

"The frozen pork belly contract was no longer seen by end users as an effective hedging instrument, particularly given the shift towards using more frozen bacon," a report from Steve Meyer and Len Steiner, for the CME Group, said.

"Also, the seasonality of pork belly prices no longer is what it used to be, with bacon becoming a staple of foodservice menus year round."

This meant a gap in contracts between August and February was "insufficient to meet the industry's hedging needs".

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Silver go to follow Golds breakout?

by Kimble Charting Solutions

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Feed Outlook – July 2011

by TCS

US feed grain supplies for 2011/12 are projected higher this month, with higher beginning stocks and production for corn., according to the latest report from the USDA Economic Research Service.

Higher Stocks and Production Boost Feed Grain Supply

The June Grain Stocks report indicated lower- than-expected March-May corn use for 2010/11, boosting projected corn carryin for 2011/12 by 150 million bushels. The June Acreage report increased planted acreage relative to March intentions and the previous month’s projection, boosting 2011/12 projected corn production 270 million bushels. Corn supplies for 2011/12 are projected 420 million bushels higher. Forecast 2011/12 prices were lowered for all four feed grains. With corn price prospects reduced, domestic use is projected up 145 million bushels as increased feed and residual and ethanol use more than offset small reductions for starch and high fructose corn syrup (HFCS). US corn exports are increased 100 million bushels, mostly due to increased demand from China. Increased US corn supplies more than offset higher use, leaving projected 2011/12 ending stocks up 175 million bushels. 

Domestic Outlook

Feed Grain Supply Prospects Raised for 2011/12

US feed grain supplies for 2011/12 are projected higher for July, reflecting higher beginning stocks and production for corn. US feed grain production for 2011/12 is projected at 382.6 million tons, up 9.6 million tons from a month ago and down 2 million tons from the 2010/11 estimate. The June 30 Acreage report showed planted acreage increased relative to intentions for corn and decreased for the other feedgrains. Corn beginning stocks are raised 150 million bushels reflecting changes in 2010/11 use. Corn production for 2011/12 is projected 270 million bushels higher based on harvested and planted area reported in the Acreage report.

The first survey-based production forecast for barley in the July 12 Crop Production report lowers output 2 million bushels from the June projection as lower harvested acreage more than offsets an increase in yield. Barley beginning stocks are reduced 3 million bushels due to increased 2010/11 use revealed by the June 1 stocks estimate. The first survey-based production forecast for oats is 15 million bushels lower than the June projection, reflecting a decline in projected harvested acres and expected lower yield. Oat imports are projected 5 million bushels lower than last month’s projection but 7 million bushels above the 2010/11 estimate. USDA will make its first survey-based forecasts for corn and sorghum production in the August 11 Crop Production report. 

June 1 Stocks Estimate Eases Stocks Situation

The Grain Stocks report, issued by USDA’s National Agricultural Statistics Service on June 30, 2011, showed higher-than-expected June 1 corn stocks indicating a lower-than-expected March-May disappearance during 2010/11. This month’s changes to 2010/11 corn usage raise carryin for the 2011/12 crop year 150 million bushels over last month’s projection, but beginning stocks remain down dramatically, at 52 per cent of the 2010/11 estimate. June 1 stocks for sorghum raise indicated March-May disappearance, lowering expected ending stocks for 2010/11. June 1 stock estimates reduce barley 2010/11 ending stocks 3 million bushels and raise oats 2010/11 ending stocks 2 million bushels. Ending stocks for 2010/11 are down year to year for all four of the feed grains.

Corn ending stocks for 2011/12 are raised 175 million bushels from last month’s projection based on higher production and carryin. Sorghum, barley, and oats ending stocks are down 5, 6, and 8 million bushels, respectively, as projected supplies tighten this month. 

There is no change this month in the 2011/12 corn import projection of 20 million bushels. Estimated imports of corn for 2010/11 are raised 5 million bushels to 30 million bushels on continued strong shipments from Canada.

Corn feed and residual use for 2011/12 is increased 50 million bushels as lower prices encourage feeding. The 2010/11 feed and residual use forecast is lowered 150 million bushels based on lower-than-expected March-May disappearance as indicated by the June 1 stocks. Continuing high prices are expected to limit corn use for feed with increased supplies of soft red winter wheat priced to substitute for corn in livestock feed this summer. June-August corn feed and residual use, however, is expected to be up from last year as delayed planting in eastern and southern portions of the Corn Belt limit early availability of new-crop corn. Feed and residual use in the second half of the marketing year is estimated at 1,364 million bushels, or only 27 per cent of the 5,000 million bushels projected for the year. This would be lower than any year since at least 1975, both in absolute and per centage terms.

Sorghum feed and residual for 2011/12 is projected 10 million bushels lower at 80 million bushels as reduced plantings lower supplies especially in Texas and Kansas where drought is adversely affecting this year’s crop. For 2010/11, sorghum feed and residual use are increased 5 million bushels based on indications from the June 1 stocks. The July projection for barley feed and residual use is unchanged for 2011/12 and increased 3 million for 2010/11, reflecting the lower ending stocks estimate. For oats, the July 2011/12 projection for feed and residual use is lowered 10 million bushels, reflecting lower production. For 2010/11, ending stocks are estimated 2 million bushels lower, reflecting the June 1 stocks.

Grain consuming animal units (GCAUs) are increased for July. For 2011/12, higher inventory numbers for cattle on feed and hogs boosted GCAUs from 94.2 to 94.3. For 2010/11, GCAUs increased from 92.7 to 92.9 on higher poultry inventory.

Corn Used for Ethanol Increased, Sorghum Decreased

Projected corn use for ethanol is raised 100 million bushels for 2011/12 and 50 million for 2010/11. Continued expansion in the ethanol sector as reported by Energy Department weekly data for recent months, favorable margins for refiners, and long-term trends in fuel consumption resulted in the increase to 5,150 million bushels in 2011/12 and 5,050 million in 2010/11. Sorghum food, seed, and industrial use is lowered 5 million bushels for 2011/12, with this month’s 25-million-bushel reduction in projected supplies and likely sharp production declines in the Southern Plains, due to the ongoing drought.

Projected food, seed, and industrial use of corn for 2011/12 advance 95 million bushels, with increases in corn for ethanol partly offset by lower expected use for HFCS, reflecting slower shipments to Mexico. For 2010/11, food, seed and industrial use increases 30 million bushels as corn use for starch and HFCS is reduced 20 million bushels, partly offsetting the higher projected corn use for ethanol.

Corn export projections for 2011/12 are increased to reflect increased demand from China. Projections of sorghum exports are lowered 5 million bushels to reflect tighter supplies. For 2010/11, corn exports are lowered 25 million bushels to reflect slower shipments in recent months.

Feed Grain Prices

Price projections for 2011/12 are lowered for the four feed grains. The season average farm price for corn is projected at $5.50 to $6.50, a 50-cent reduction in both the high and low ends of the range compared with June’s projection, but still a record with a midpoint of $6.00. The projected sorghum upper and lower price ranges are lowered 50 cents per bushel to $5.10 to $6.10. The upper and lower ends of the projected ranges are lowered 30 cents per bushel for barley and 40 cents per bushel for oats, resulting in projections of $5.65 to $6.75 and $3.20 to $3.80, respectively. 

For the 2010/11 corn price estimate, the upper end of the range is lowered 15 cents and the lower end lowered 5 cents. Sorghum is reduced 5 cents on the lower end of the range and 15 cents on the upper end. Final estimates for barley and oats are increased slightly.

Hay Acreage for 2011 Record Low

The June 30 Acreage report forecasts 2011 harvested acres of all hay at 57.6, down 2.3 million from last year. This would be the lowest all hay area on record going back to 1919. Harvested area of alfalfa and alfalfa mixtures is forecast at 19.3 million acres, down 627,000 million from 2010. Area for harvest of all other types of hay is expected to total 38.3 million acres, down 1.6 million acres from 2009. Harvested area for alfalfa and alfalfa mixtures is expected to the lowest since 1949 and harvested area for all other hay is expected to be the lowest since 2000. At 5- year average yields, all hay production would be 138 million tons, down 7 million from 2010 and the lowest since 1988.

Harvested acres of all hay are expected to be below or equal to last year for most States in the Corn Belt, Great Plains, Pacific Northwest, and the Rocky Mountain region. Record low harvested acreage is expected in Iowa, Nebraska, Minnesota, Maine, Pennsylvania, and Wisconsin while record high acreage is expected in Arkansas. Record high acres of alfalfa and alfalfa mixtures are expected to be harvested in Montana. In Arkansas, record low acreage is expected for alfalfa and alfalfa mixtures in contrast to the record-tying high harvested acreage of other hay that is expected.

Corn Used for Dry Mill Fuel Ethanol Production and Distillers’ Grain By-Products

As corn-based fuel ethanol production has risen over the past decade, there has been interest in the volume of distillers’ grains produced. Distillers’ grains are a by-product from dry-mill ethanol plants and can be used in livestock rations, particularly by ruminants such as beef and dairy cattle. Since most of the expansion in fuel ethanol production has been in corn-based dry mill plants, production of distillers’ grains has shown a rapid expansion as well.

Figure 7 provides an indicator of the growing importance of distillers’ grains by showing estimates of the amount of corn utilization that produces distillers’ grains from dry mill fuel ethanol production. Calculations are based on data provided in Hoffman and Baker, Market Issues and Prospects for US Distillers’ Grains Supply, Use, and Price Relationships, USDA-ERS Outlook Report No. FDS-10K-01, December 2010.

To arrive at the estimates for corn that produces distillers’ grains from dry mill fuel ethanol production, two steps are made in the calculations. First, the volume of corn used in dry mill fuel ethanol (and by-products) production is separated from the volume used for all ethanol (and by-products) production. This share has risen from 30-35 per cent a decade ago to about 90 per cent in 2010/11. Second, since about 17.5 pounds of distillers’ grains are typically produced from each bushel of corn used in dry mill ethanol production, 31.25 per cent (17.5 lbs. distillers’ grains per each 56 pound corn bushel) of the corn used in dry mill ethanol production was allocated to the production of distillers’ grains. Based on these assumptions, the amount of corn that produces distillers’ grains from dry mill fuel ethanol plants is expected to account for about 11 per cent of total corn utilization in 2010/11.

Allocation of corn to the production of other ethanol byproducts, such as corn gluten feed and corn gluten meal from wet-mill ethanol plants, are not separated in this depiction. For more information regarding the breakout of these categories, see the Hoffman and Baker report cited above. 

International Outlook

US 2011/12 Corn Export Prospects Boosted, 2010/11 Trimmed

Increased US corn supplies and more competitive prices are supporting US corn export prospects for 2011/12. This month, trade year (October-September) exports are increased 2.0 million tons to 48.0 million while local marketing year (September-August) exports are projected up 100 million bushels to 1.9 billion. World corn trade is boosted 1.2 million tons to 93.7 million as lower corn prices encourage additional imports, especially by China. Competing corn export prospects are reduced 0.8 million tons this month mostly due to tight supplies in a few minor exporting countries.

Canada’s corn export prospects are cut 0.5 million tons to 0.5 million because of reduced supplies. Canada’s 2011/12 corn beginning stocks prospects are reduced 0.5 million to 1.1 million due to strong corn use for ethanol in 2010/11. Canada’s corn production prospects for 2011/12 are reduced 0.2 million tons to 11.3 million because not all the intended corn acres got planted.

Mexico’s 2011/12 corn exports are cut 0.2 million tons this month to 0.1 million, mostly due to reduced production for both 2010/11 and 2011/12. Russia’s corn exports are also trimmed 0.2 million tons as the planned area increase is reported to have fallen short of expectations, reducing production prospects 0.5 million tons to 5.5 million. These declines are partly offset by a small increase in export prospects for Belarus, where corn area increases are reportedly greater than expected, boosting production prospects 0.2 million tons to 1.2 million.

China’s corn imports for 2011/12 are increased 1.5 million tons to 2.0 million. On July 7, USDA announced a sale of 0.54 million tons to China for delivery in 2011/12. Moreover, some of the unusually large corn sales to “unknown” destinations for both 2010/11 and 2011/12 are rumored to be for China. High corn prices in China make imports attractive, and growth in pork prices and hog numbers support prospects for continued strong corn prices in China. 

Algeria’s corn imports for 2011/12 are increased 0.1 million tons to 2.6 million, reflecting strong demand driven mostly by increasing poultry production. Based on recent trade data, the country’s 2010/11 corn imports are raised 0.3 million tons to 2.7 million. Similarly, Peru’s corn imports for 2011/12 are raised 0.1 million tons to 1.5 million, while 2010/11 imports are boosted 0.2 million tons to 1.7 million.

Partly offsetting is Syria’s 2011/12 corn imports, which are reduced 0.2 million to 2.0 million, while 2010/11 imports are trimmed 0.3 million tons to 1.7 million. Also, there is a 0.1-million-ton reduction in 2011/12 corn import prospects for Taiwan, to 4.6 million tons. The slow pace of corn purchases and shipments caused a reduction of 0.3 million tons to 4.3 million for 2010/11 imports.

Other changes to forecast of 2010/11 imports based on the pace of ongoing sales and shipments include: an increase of 0.3 million tons to 7.3 million for the EU, based on the pace of shipments and import licenses; a reduction of 0.1 million to 0.2 million for Russia; and an increase of 0.15 million tons to 0.75 for US trade year imports (the local marketing year imports are raised 5 million bushels to 30 million) due to shipments from Canada.

This month, US corn exports for 2010/11 are reduced 0.5 million tons to 48.0 million, (trimmed 25 million bushels to 1.875 billion for the local marketing year). The pace of sales and shipments in recent weeks has fallen below expectations. Census exports for October 2010 to May 2011 reached 30.3 million tons, down 4 per cent from the previous year, and June 2011 corn grain inspections were only 3.9 million tons, down 5 per cent. Moreover, at the end of June, outstanding export sales for shipments in the old marketing year were 8.3 million tons, down 16 per cent from a year ago. Corn export shipments during summer 2011 are no longer expected to support a year-over-year decline in exports of 4 per cent as forecast last month for the local marketing year and 3 per cent for the trade year. 

Changes to projected 2010/11 corn exports for other countries based on the pace of shipments include a 0.1-million-ton increase for Thailand and a smaller boost for Moldova.

US 2011/12 Sorghum Export Prospects Reduced

US sorghum export prospects for 2011/12 are limited by reduced production prospects. Exports are reduced 0.2 million tons this month to 3.3 million (cut 5 million bushels to 130 million for the local marketing year). An offsetting change is made for Argentina, with sorghum exports up 0.2 million tons this month to 1.7 million. Sorghum trade changes for 2010/11 include an increase of 0.2 million tons to 1.8 million for Argentina’s exports, based on the strong pace of sales and shipments, and a reduction of 0.2 million tons in imports for Mexico, due to a reported increase in production and the pace of imports and purchases.

Barley Trade Highlights Offsetting Changes

Global barley trade in 2011/12 (October-September) is projected down slightly this month at 13.1 million tons. Production changes support reduced export prospects for Ukraine, offset by increases for Argentina and Turkey.

Ukraine reported lower barley area planted and spring dryness followed by excessive rains in June trimmed yield prospects. Production for 2011/12 is reduced 1.0 million tons this month to 7.5 million. The reduced production during summer 2011 is projected to reduce 2011/12 exports 0.6 million tons to 2.9 million, and 2010/11 exports 0.4 million tons to 2.1 million.

Argentina’s barley area and production are up this month for both 2010/11 (up 0.6 million tons to 2.9 million) and 2011/12 (up 0.2 million to 2.7 million). The production increases and the strong pace of recent sales and shipments support increased exports forecast for 2010/11 (up 0.3 million tons to 1.6 million) and 2011/12 (up 0.4 million to 1.5 million).

Turkey’s barley yields are projected higher this month as a wet cool spring delayed crop development but boosted yields. Production in 2011/12 is projected up 0.8 million tons to 6.5 million. While the slow pace of old-crop exports is dropping the 2010/11 export forecast 0.1 million tons to 0.05 million, the increased production prospects support an increase in 2011/12 exports, up 0.1 million tons to 0.15 million.

Australia’s 2010/11 barley export pace has been slow, reducing the forecast 0.3 million tons to 4.0 million. Global barley trade in 2010/11 is reduced 0.5 million tons this month to 13.8 million, the lowest in 13 years. Import changes for 2010/11 include: Syria, down 0.4 million tons to 0.2 million; Israel, down 0.1 million to 0.25 million; China, up 0.1 million to 1.6 million: and Algeria, up 0.075 million to 0.075 million.

Import changes for 2011/12 mostly follow adjustments for the previous year, with Syria and Israel each down 0.1 million tons, while China is up 0.1 million and Algeria is up slightly. Turkey’s 2011/12 imports are trimmed slightly.

US Oat Imports To Be Limited by Canada’s Tight Supplies

Oats area planted in Canada is reduced this month due to extended rains throughout the planting season in southwest Manitoba and into southern Saskatchewan. Production for 2011/12 is down 0.4 million tons to 2.9 million. Canada’s beginning stocks for 2011/12 are reduced slightly this month because of the pace of 2010/11 exports (up 0.05 million tons to 1.4 million). Beginning stocks are forecast to be down more than 40 per cent from the previous year’s level. Exports prospects for 2011/12 are reduced 0.1 million tons to 1.45 million. This is reflected in a reduction in US imports, down 0.1 million tons to 1.5 million (local marketing year imports are reduced 5 million bushels to 90 million).

Global Coarse Grain Production Shifts Mostly US Changes

World coarse grain production for 2011/12 is projected up 6.5 million tons this month to 1,150.3 million, but foreign changes are mostly offsetting, netting an increase of 0.4 million tons to 795.8 million. Production changes not previously noted in the trade section include: Russia’s barley up 1.0 million tons to 15.5 million due to good preliminary yield reports; Ukraine corn up 0.5 million tons to 15.5 million with an increase in area planted; EU barley up 0.4 million tons to 52.1 million due to good yields in Spain; small increases in oats in Australia and barley in Georgia; and small reductions for corn in Kazakhstan and Australia and rye in Canada.

World Coarse Grain Use Prospects Increased

Global coarse grain consumption in 2011/12 is projected up 6.3 million tons this month to 1,158.4 million. Foreign use is up 3.2 million tons to 852.1 million. China’s use is up 1.6 million tons to 190.6 million, with increased corn imports and strong demand for meat supporting use. Russia is up 0.8 million tons to 27.3, with increased barley production and increasing meat production. Turkey is up 0.6 million tons to 11.4 million, supported by increased production. Other changes are small.

Global Ending Stocks Prospects Increase Mostly In the United States

While world coarse grain ending stocks for 2011/12 are projected up 4.0 million tons to 149.2 million, foreign stocks are down 0.1 million to 124.4 million. Canada’s ending stocks are reduced 0.5 million tons this month with reduced production. Mexico’s corn crop reductions trim ending stock prospects for coarse grain 0.4 million tons. Argentina’s increased barley exports more than offset increased production, leaving coarse grain ending stocks reduced 0.2 million tons. Lower barley imports trim Syria’s coarse grain stock projection 0.2 million tons. These and smaller reductions are offset by increased stocks prospects for: EU stocks, up 0.4 million tons supported by barley production; Australia, up 0.3 million due to reduced 2010/11 barley exports; Turkey, up 0.2 million, and several smaller increases in other countries. 

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Total Meat Production Lowered

By: AgWeb.com Editors

LIVESTOCK, POULTRY, AND DAIRY: The forecast for 2011 total meat production is lowered from last month as lower beef production more than offsets higher expected pork and turkey production. Beef production is lowered as steer and heifer slaughter in the second quarter was lower than expected although more cows were slaughtered. In addition, recent placements of lighter-weight cattle are expected to moderate carcass weight growth during the year. The 2011 pork production forecast is raised on larger fourth-quarter slaughter. Broiler production for 2011 is unchanged as higher secondquarter production is offset by lower forecast production in the fourth quarter. Turkey production is raised largely on higher second-quarter production. No change is made to table egg production but hatching egg production is lowered due to a stronger forecast decline in last-quarter broiler production.

 

For 2012, meat production forecasts are reduced as a sharper reduction in the broiler production forecast more than offsets higher pork and turkey production. Larger cutbacks in broiler production are expected to carry into 2012 before production increases gradually later in the year. The pork production forecast is raised slightly, driven primarily by gains in pigs per litter. Despite higher forecast hog prices, producers are expected to remain cautious in expanding farrowings. Egg production forecasts for 2012 are reduced on less demand for hatching eggs.

 

A small increase is made to the export forecast for beef in 2011 but no changes are made to pork or broiler exports. For 2012, pork exports are raised, but no changes are made to either beef or broilers. No changes are made to beef, pork, or broiler imports for either 2011 or 2012.

 

Cattle and hog prices are forecast higher for 2011 but forecast broiler prices are lowered as large supplies are pressuring prices. For 2012, cattle price forecasts are unchanged. Hog price forecasts are raised as demand strength carries into 2012, but price gains will be moderated by higher production. Broiler prices are raised slightly as 2012 supplies are forecast to be tighter.

 

Milk production forecasts for 2011 and 2012 are raised. Cow numbers are forecast higher as higher milk prices and lower forecast feed prices support further herd expansion, but milk per cow is unchanged from last month. Commercial exports on a fat basis are forecast higher for 2011. Ending stock forecasts are raised as cheese stocks are larger than expected.

 

Dairy product price forecasts for 2011 are raised from last month. The Class III and Class IV price forecasts are raised from last month in line with increased product prices. The all milk price is forecast at $20.00 to $20.30 per cwt for 2011. For 2012, the butter price is forecast slightly higher than last month, but forecasts for other products are unchanged. Class price forecasts are unchanged. The all milk price forecast for 2012 is unchanged at $17.75 to $18.75 per cwt.

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Cattle market in US to face 'explosive situation'

by Agrimoney.com

The dry weather in the South has set up the US for a "potentially explosive situation" in cattle markets – although only after sapping prospects for the current rally in prices.

US beef cow slaughter topped 75,000 head in the week to June 26, the latest data available, the highest total of 2011 - and in a period when liquidation typically shows a small decline.

The rise has been attributed by some analysts to strong demand, with the July 4 weekend typically seen as a peak in America's barbecue season.

"We are seeing demand picking up from a lot of packers," said Drax Wedermeyer at US Commodities, which estimated beef processors' margins topping a "large" $55 a head in mid-June, amid the slaughter spike.

Margins had fallen back to below $30 a head by the end of last week.

'Simply not enough grass'

However, "one of the most severe droughts in years" in many parts of a swathe of America from Arizona in the west to Maryland in the east may also be encouraging farmers to accept strong prices for cattle, two leading analysts said.

"There is simply not enough grass to support cow herds," Steve Meyer and Len Steiner said.

Official data overnight showed US pasture rated on average as 49% in "good" or "excellent" condition, compared with 65% a year before.

In Texas, where 86% of pasture was in "poor" or "very poor" health, "some livestock problems were encountered with cattle drinking high salinity water from wells and windmills", the US Department of Agriculture said.

With hay expensive too, "many cattlemen simply do not have the necessary resources to hang on", Dr Meyer and Mr Steiner said.

'Must be a reckoning'

The dent to breeding stock, at a time when the US herd is already at among its lowest levels in decades, looks set to dent future supplies – and lift prices.

"There must be a reckoning," the analysts said.

"The number of available calves must fall, setting up a potentially explosive situation for calf prices and, eventually, for feed cattle, fed cattle and beef."

Short-term blip?

However, it could curtail in the short-term the rise in prices of feeder cattle, those ready for fattening, if ranchers are opting to place stock in feedlots as well as take them to slaughter.

"It now appears that the drought and high fertilizer prices have reduced available grass pastures enough to push more cattle, even some spring calves, into yards.

"Our contacts tell us to not be surprised to see June placements [of feeder cattle on feedlots] at or above year-ago levels and easily high enough to keep feedlot inventories above year-ago levels.

"That would suggest higher live cattle numbers, year-on-year, through the end of this year."

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Corn could stem rally in feeder cattle prices

by Agrimoney.com

A further rebound in corn prices could curtail the rally in feeder cattle futures, which rose to a record high on Tuesday amid expectations of a scramble by feedlots for extra animals.

Feeder cattle - cattle ready for fattening on feedlots – touched 141.85 cents a pound in Chicago for August delivery, an all-time high for a spot contract, and extending to 13% gains over the last month.

The rally has been supercharged by expectations that weaker corn prices will encourage feedlots to take on extra animals, at a time when the pipeline of feeder cattle appears thin.

Farmers in drought-affected areas of the US South, accounting for roughly one-third of the national herd, sold cattle at lighter weights than normal because of the poor pasture conditions and, with the national herd at its smallest for decades, replacement supplies are expected to be hard to come by.

"We have a small herd anyway, and on top of that the picture has been distorted by placing cattle [on feedlots] early," Jerry Stowell, at broker Country Futures, based in Kansas state, said.

Corn factor

However, while there still looked considerable potential for feeder cattle prices to rise further, the upside could be limited by a further revival in the price of corn, a major fodder source for feedlots.

"We are bullish feeder cattle. But if corn yields come in slightly below expectations, we could see feeder cattle falter at the mid-150s [cents a pound]," Mr Stowell said.

Conversely, the prospect of a rash of fattened animals emerging from feedlots later in 2011, following the strong pace of placements of feeder cattle in the spring, has kept a lid on prices of live cattle- those ready for slaughter.

Live cattle for October shed 0.1% to 119.50 cents a pound, with those for August delivery adding 0.4% to 113.325 cents a pound, helped by stronger cash markets - and positive packer margins, of about $13.25 a head, even at these higher prices.

Regulatory data show speculators taking an increasing interest in cattle, with "managed money's " net long in Chicago feeder cattle tripling to 1,000 lots in the week to last Tuesday, and rising 4,800 lots to nearly 65,000 contracts for live cattle.

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Hog futures dip amid doubts over breeding cutbacks

by Agrimoney.com

Hog futures tumbled in Chicago, sapped by weaker cash markets and doubts over production curbs by US producers who have, for the first time, achieved 10 piglets per litter.

Cash prices for hogs - which in Iowa-Minnesota averaged nearly $103.51 a hundredweight on Thursday - were $5.80 a hundredweight cheaper on Monday, US Department of Agriculture data showed, in a decline blamed by investors on high prices deterring demand.

Meanwhile, many investors took an increasingly downbeat view of a benchmark USDA report late on Friday which was initially seen as only modestly bearish, showing the domestic hog herd some 0.4% larger than the market had expected.

However, the overall figure concealed, at 12.4m animals, a significantly higher number of larger, 120-179 pound pigs than had been expected.

This figure is "bearish for cash hogs during the July-to-September time frame", during which they are likely to hit the market, US Commodities said.

'Conflicting data'

Furthermore, some observers questioned the prospect of muted hog production, as implied by falling farrowing intentions, which were forecast to fall 2.6% in the current, June-to-August period - implying a drop to a 25-year low.

"This report contains conflicting data," analysts at Paragon Economics and Steiner Consulting said, flagging the apparent contradiction of falling farrowing intentions with separate statistics in the USDA report showing a rise in the breeding herd.

"Logic does not support a decline in this important driver of total productivity and profits."

The analysts also highlighted the rise in surviving piglets per litter to a record 10.03 during the March-to-May quarter, taking the average growth rate over the last four years back over 2%, compared with 0.5% during the previous decade.

US farmers achieved fewer than 7.8 piglets per little 25 years ago.

Chicago prices

In Chicago, lean hogs for July delivery stood 2.1% lower at 93.95 cents per pound in late deals.

The better-traded August lot fell the daily limit of 3.0 cents at one stage before recovering some ground to stand at 92.375 cents per pound, down 2.825 cents, or 3.0%.

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Pork dynamics test golden economic rule

by Agrimoney.com

Is there a flaw in the economic rule that buyers only pay up for items in short supply?

It might appear so, to judge by the pork market. The price of wholesale US pork, the so-called cut-out, has hit a record $99.27 a hundredweight, latest official data show.

That's up $2.36 on the day, and a rise of 18% year on year, with loin seeing a particular rise, at $120.15 a hundredweight, up 30% from a year ago.

Yet data this week also showed the US having a mass of pork supplies. Pork in cold storage in America has reached 545.1m pounds, nearly 100m pounds more than a year earlier, and some 30m pounds more than the market had expected.

Indeed, the figure was blamed for fuelling a rise of 1.0% in hog prices on Thursday, even when cattle rose.

The apparent contradiction between high prices and rich supplies "is certainly a strange one", Don Roose, at broker US Commodities said.

Sign from butts

Analysts scratching their heads for explanations have come up with two.

The first is a matter of detail, with the cold storage data including not just meat set aside for inventories but product in transit for export too – that is quite some volume, given that officials expect US pork shipments to jump 15% this year to 4.87bn pounds.

Signally, stocks were particularly high of frozen pork butts, a popular shipment to South Korea, which has been a key importer of meat this year after an outbreak of foot-and-mouth disease ravaged its domestic industry.

'Backward looking'

The second is down to timing.

The stocks report, which gave data as of the end of May, is "by its nature backward looking," Alton Kalo, at Steiner Consulting, said.

"It is looking at what happened in April and May," when prices fell, encouraging processors to store pork rather than sell it, rather than the more positive dynamic since.

And, even so, the drag from high stocks could be seen on some cuts.

"Belly prices normally increase into May and June. This would explain when belly prices pulled back this time," Mr Kalo said.

'Prices to dip'

But not all the analysis is so upbeat for producers. For one, even at record price, pork carcasses were not covering the hog costs, which have, on cash markets, hit a series of record, mostly $103.51 a hundredweight in Iowa-Minnesota.

"Hog prices are going to have to come back."

Furthermore, for poultry farmers, a rise in chicken in cold storage cannot so easily be explained away, given flagging exports and low prices.

"Breasts are selling at $1.22 when you have thought they would sell at $1.50-1.60 at this time of year," Mr Kalo said.

Data later

The comments come ahead of a quarterly US Department of Agriculture report on US hogs and pigs, later on Friday, expected to show little change in either of the three main dynamics – national herd size, animals kept for breeding, and kept for marketing – despite high corn prices raised feed bills.

"Producers have already liquidated so much of their hog herd in the US already," Mr Roose said, with numbers falling heavily in the end of the last decade, hit by a double whammy of first high corn costs then the world recession.

Furthermore, given the factory nature of modern hog farming, and potentially order commitments, it was "no so easy to slow it down".

Producers may be taking a "wait and see" attitude, to assess whether high grain prices will persist, he added.

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Cattle prices jump, as feedlots put the brakes on

by Agrimoney.com

Cattle prices soared again on Monday, with feeder cattle touching limit up for a third successive session, as data showing a tumble in feedlot animal populations encouraged buyers to bid up.

Live cattle for August, the best traded lot, stood 1.6% higher at 111.975 cents a pound in late deals in Chicago, seeking its highest close in six weeks, and taking its gains in three sessions nearly to 8%.

Feeder cattle - animals ready to be placed on feedlots rather than the live cattle already fattened for slaughter - stood up the maximum 3.0 cents that the Chicago exchange allows, taking the contract to 135.65 cents a pound, also up nearly 7% since Wednesday.

"Cattle are in a run-away to the upside," Jerry Stowell at broker Country Futures said.

"We got the bullish [[US cattle on feed] report, and we are off to the races again today."

'Prices still too low'

The US Department of Agriculture briefing on Friday showed US feedlots running, at 10.9m cattle, with some 140,000 fewer animals as of the start of the month than investors had expected, if a number higher than at the start of June last year.

The shortfall was down both to a jump in sales of cattle for slaughter to well above expectations as well as to a 10.8% slide in the number of animals placed on feed last month, compared with a year before.

In part these dynamics reflected the difficulty some feedlot operators are having in turning a profit in the face of high corn prices.

"Feedlots are finding it increasingly difficult to realise a positive margin," a report from Paragon Economics and Steiner Consulting said.

"Live cattle prices are still far from where they should be in order to encourage placements," despite gains in futures markets which were echoed on cash markets, where prices gained some $3-4 a hundredweight in the south of the US last week to hit $109-110 a hundredweight.

In the north, prices rose by $4-5 to reach $111-112 a hundredweight.

Feeder shortage

However, the slide in placements was also seen down to supplies of feeder cattle dwindling – as long foreseen - after being boosted by drought in Mexico and the south of the US.

"With the smallest calf crop in over 50 years, feedlots will find it increasingly difficult to find feeders that have breakevens anywhere close to acceptable levels," Paragon Economics and Steiner Consulting said.

With feeder cattle supplies potentially dwindling, and live cattle supplies coming out of feedlots to dwindle as lower placements feed through, the USDA data was "bullish across the board", Terry Roggensack at Hightower report said.

Question of speed

Nonetheless, Mr Roggensack was among analysts surprised by the extent of Monday's reaction, given the "strong moves the market has already made this past week".

Mr Stowell, at Country Futures, said: "With all due respect to the bull outlook, we question the speed to which we are rising."

Price rises are seen being fuelled by buying by speculators who had a relatively small net long position in live cattle, and were net short in feeder cattle, last week heading into the rally, official data show.

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Cattle futures surge as packers pay up

by Agrimoney.com

Cattle futures rose the exchange maximum in Chicago – in sharp contrast to the slump in crop prices – after data showed buyers paying up for animals, even in the face of a stream of supplies from drought hit Mexico.

Futures in both live cattle, animals fattened for slaughter. and feeder cattle, those ready to be put into feedlots closed up the limit of 3.0 cents a pound, at their highest in nearly a month, even as grains and many soft commodities posted another session of heavy losses.

The jump followed reports of meat packers paying up to $109 per hundredweight for fattened cattle on cash markets, up some $3 on the day.

US beef export sales came in at 15,800 tonnes, according to weekly government data, keeping the country on track to complete its recovery, in trade volume terms, from losses sustained following a BSE outbreak in 2003.

'New trend higher'

The data were seen as fuelling a round of covering by speculators of short positions –that is, bets on falling prices.

"It's been a while since we have had cattle and feeder cattle up the limit," Mike Mawdsley at Market 1 said.

"Of course, funds have been short."

And the revival raised hopes of an end to a correction which, at its early-June nadir, took feeder cattle prices down 14% from their record high in early-April, and live cattle down 18%.

"Fundamentally, it feels too early for this upside breakout, but the market is saying it's time to go," Jerry Stowell at Country Futures said.

"The market now looks poised to start a new trend higher."

'Could endanger animals'

The rise in cattle prices comes at a time when many ranchers in the southern US and Mexico have been running down herds in the face of drought which has left little pasture.

Indeed, the "principal forage-producing states of Mexico are facing extreme drought conditions that could endanger animals, particularly if critical rainfall is not received in June and July", the rainy season for these areas, US Department of Agriculture analyst Rachel Johnson said.

Some 40% of Mexico is suffering a drought billed by President Felipe Calderon as the worst in seven decades – while 2010 was the rainiest year on record.

US cattle imports from Mexico, often this year for placement directly on feedlots given the shortage of pasture, have remained firm after jumping 28% in the first four months of 2011, compared with year-before levels

"These higher imports have been maintained in recent weeks, as weekly [official] data reports through the first week of June also show cattle imports from Mexico 27% higher year-over-year," Ms Johnson said.

Staying north

Conversely, exports of live sheep from the US to Mexico tumbled below 5,000 animals in the first quarter to their lowest in at least six years, and down by two-thirds on the same period of 2010.

US sheep exports to Mexico hit 22,000 animals in the April-to-June quarter last year.

The US Department of Agriculture will on Friday release monthly data expected to show placements of cattle on feedlots falling 7.8% in May from a year before, as supplies of feeder cattle wane.

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