US cattle feedlots to resume profitability soon

US feedlots could have part of their losses mitigated in 2016, with higher cattle numbers and cheaper feed, according to analysts.

The supply of beef will continue as demand begins to gain pace. The result is a reduction in prices for hamburgers and steaks, a development that would ensure that feedlots remain operational while also preventing disruptions in beef production.

Feedlots in the States have endured 15 consecutive months of decline. Escalating prices of 600-900 pound calves, together with declining bids from packers, exert a constriction on profitability.

However, by February, feedlots managed, on average, to cut down losses to US$218 per head, a significant improvement from a US$500 losses in December, based on estimates by Colorado-based Livestock Marketing Information Center (LMIC).

Feedyards could be able to weather through a tough season by exercising flexibility in using different sources of feed as well as the depending factor on operational size and focus, experts said.

Other measures include employing futures and options for hedging or tapping into profit reserves.

Difficult days of late had caused the decline of USfeedlots; USDA figures showed last year''s numbers at 27,189, a drop from 28,127 in 2014, and 29,090 in 2013.

Nevertheless, as the cost of calves for feedlots dips, farmers began to increase herds which reached a 63-year low in 2014 due to the destruction of crops from a serious drought. By January this year, the cattle population swelled to a five-year high of 92 million.

In addition, the number of animals located to feedyards achieved its highest for that month in eight years, based on government figures.

Earlier in March, Cargill expects bigger supplies to cut retail costs as it acquired a ground beef processing facility.

Prices for cattle ready for slaughter have bounced back to about US$139 per hundredweight (cwt) from around US$117 in late 2015.

In light of higher demand with an upcoming spring barbecuing season, feedlot could soon benefit with a return to profitability, said David Anderson, an economist with Texas A&M University.

- Reuters