USDA announced that November placement of cattle into feedlots was up 4% from a year ago. Cattle placements have been high all year according to University of Missouri-Columbia Agricultural Economist Ron Plain. He says the high placements were inevitable due to the extremely dry weather and lack of pasture, although he was surprised by the high placement numbers in the latest Cattle on Feed Report.
"It's certainly some continuation of the drought, but the other thing is corn prices have come down," Plain said. "The peak in corn prices came back around Sept. 1 so we saw a decline in corn prices as we went into November and the economics just gets a little bit more appealing when feed gets cheaper to place cattle into feedlots a little bit lighter."
Coupled with the lower cost of feed was the fact that slaughter cattle prices were at record highs, which Plain says tends to get people excited so that was another factor in placing some animals perhaps a little bit sooner than they otherwise would have. Looking forward into 2012 Plain says placement numbers will change.
"We're bound to see a drop off at some point," Plain said. "Certainly if we can get some better weather and more grass we really should see a sharp drop off in placements. USDA is forecasting beef production next year is going to be down about 4.5% from this year, so we should see that really start to fall off especially once spring gets here and grass greens up."
Plain says that when those placements do drop it is going to result in more records at the grocery store.
"USDA just released the average price of choice beef in grocery stores during the month of November; $5 a pound, the highest ever for the third month in a row," Plain said. "Beef supply is tight, we're looking at record prices and we're going to see more next year. There'll be more Americans next year but less beef so bargains in the meat case are going to be kind of tough to come by."
Plain says the economic incentive for expansion in the cattle industry is there, but it is going to take quite a bit of time and better forage and pasture conditions before we start to see some growth.
To listen to Jason Vance's conversation with Ron Plain use the audio player on this page.