In this weekly Commodities Watch column, John T. Barone, president and commodities analyst for Market Vision Inc., offers a snapshot of the state of commodities for restaurants.

Friday’s USDA cattle report showed feedlot inventories at 10.74 million head, a decrease of 3.1 percent compared with a year ago.

New feedlot placements in May were 2 percent higher than a year ago, suggesting that herd liquidation continues.

Pasture conditions are still poor, with drought still affecting roughly 85 percent of Texas. Beef cow slaughter rose 17 percent in April–May compared with a year ago, and the beef cow herd is at a 72-year low.

The extra slaughter has helped beef prices cool a bit from pre-Memorial Day record highs. But longer-term fundamentals remain bullish. Producers will eventually begin retaining heifers for breeding, sending fewer to slaughter and tightening beef supplies. But once that process starts it will be another two to three years before we see a turnaround in beef supplies.

Currently, the USDA is forecasting 2014 cattle prices at $134 per hundredweight, an increase of 5.1 percent from projected 2013 levels.

Contact John T. Barone at jbarone@mktvsn.com.