Livestock Herds Expanding

Two reports on Friday from the USDA showed that cattle and hog herds continue to expand in the United States, likely signaling record beef and pork production in 2018.

For livestock producers, this expansion has been the result of profitable prices, but rising inventories could exceed demand and eventually knock prices lower.

Falling prices could be a boon for grocery shoppers but ultimately hurt producers. Meanwhile, corn and soybean farmers should appreciate rising herd sizes as an early gift, as corn- and soy-fed beef and pork will increase demand for their crops.

The hardest hit market after these reports was feeder cattle futures, which represent young cattle that are old enough to be moved into a feedlot. Demand for these animals may fall as existing herds are already quite large, a factor which knocked prices for March feeders to a three-month low near $1.38 per pound.