Sure, this is the largest April Cattle on Feed number in quite some time; and yes, we haven't seen monthly placement totals fall below year-ago levels since September.

While carcass weights are falling, they are still seasonally large. This all equates to somewhat of a bearish circumstance from a supply standpoint. However, the biggest factor driving the market may well be oil prices. Last week we saw oil crawl above $75/barrel. I'm not that old, and I remember my Texas friends complaining about $14/barrel oil! Gas prices are nearly $0.70/gal. higher than a year ago, and it's quickly zapping consumer's disposable income and confidence.

Beef is the premium product in the marketplace, and when the economy tightens we really feel the effect. To see how high up the list of priorities oil/gas prices has moved, just look at what Congress and President Bush are talking about. Nobody has an answer but everyone wants to be seen as taking a proactive approach. I pulled up articles from ten years ago on the lack of new refineries, the environmental pressures that have stopped critical infrastructure and reserve development, the growing demand with huge countries like China adopting capitalistic reforms, and instability in the Middle East.

Yet, we find all these predictions coming true, and the solutions all long-term in nature. If oil prices stay at current levels they will have a cooling effect on the whole economy, and the biggest difference in beef demand from this year to last can simply be calculated every time you pull into the gas station to fill up. Ironically, the effect is not only on demand. Higher fuel and fertilizer prices have caused a shift away from corn to lesser input crops, and the result will be higher input costs than otherwise suggested. -- Troy Marshall