The success of the super center concept hasn’t gone unnoticed in the food world, and thus explains the format’s domination of growth during the past six years. A number of competitors are increasingly trying to introduce similar formats, including Target and K-Mart, while even traditional grocers are expanding their product offering to more closely mimic the super center concept.
Since December the fed cattle market has consistently outperformed the S&P 500 and is now about 15% ahead of the broader stock market index. It’s somewhat surprising that beef values and fed cattle prices have been able to outpace the broader economy – especially in an era of high unemployment and relatively weak consumer confidence.
The cattle market appears poised to make another run at breaking through overhead resistance at $130+ in the coming months. Once again, the beef complex demonstrates an incredible ability to be resilient and robust even under serious concerns.
Looking at beef cattle feed prices in late 2013, the market is pricing in a significant break for corn prices. Meanwhile, there’s no way to forecast hay costs through futures markets; hence, the most reliable estimate is based on historical relationships.
If Food Safety Inspection Service inspectors are put on furlough as part of the March 1 sequester, USDA’s Feb. 22 Cold Storage report indicates the complex has approximately one week’s worth of beef and beef products to meet typical business requirements.
Kansas Farm Management Association data on five-year moving averages for three key metrics indicate that cow numbers and the number of calves marketed have hit a plateau in Kansas. The average marketing weight of those calves, however, has increased by 20-30 lbs./head. Is this Kansas data representative of the broader industry, and how has your operation changed and adapted over time?
The latest U.S. cattle inventory report shows that the beef cowherd continues to shrink and has shed an average of 350,000 head annually for the past 17 years. With numbers down and calf prices up, the basic fundamentals are in place for heifer retention to begin in earnest. But, while prices have been high, they apparently haven’t been high enough. The ultimate question becomes, given the new operating dynamics, what level of return will be required to reverse this trend and encourage producers to begin rebuilding the cowherd?
Tyson CEO Donnie Smith recently noted that his company is witnessing price resistance among consumers and some are trading down, away from beef to chicken. Only time will tell if that occurs in a significant way. If so, it will be translated fairly readily into the wholesale market and could provide a major challenge for this spring’s fed market. As such, risk management is especially warranted here.
U.S. beef cow numbers have shrunk by an average of 350,000 head/year for the past 17 years. Despite such a huge loss of breeding animals, the industry has proven able to compensate for fewer numbers with better genetics, improved management and better technology. But the industry is flirting with a liquidation mentality that could become self-perpetuating, which would prove very detrimental to the industry in the long term.
Data collected over the past 15 years in the state of Kentucky suggest that producers increasingly are exercising new or alternative methods to sell/market their cattle – e.g., utilizing video or direct sales vs. auction markets. What does this portend for auction marketing in the years to come?
Though the U.S. cattle inventory will likely show contraction again this year – the 17th consecutive year of fewer numbers – an increase in animal productivity has softened the blow. That continually shrinking inventory, however, poses severe challenges on the U.S. industry’s infrastructure and service industries.
Total feedyard revenue is a function of live weight, the number of cattle marketed, and the overall market. Revenue in this sector declined in 2009 on the heels of the financial crisis that hit the U.S., as well as weaker markets. However, it’s come roaring back since then, surging nearly 50%. The question is: What’s in store for 2013?
Market trends depict a growing proportion of branded beef sales over time. Another trend in the wholesale market is the increasing proportion of out-front sales of beef. The result is this segment – much like the live-cattle market – is utilizing the spot market less and less.