My View From The Country

Did You Ever Think You’d See $1.50 Fed Cattle?

Everyone will be looking for the top of the market and the pullback that will follow, but right now, it is time to just enjoy the ride.

These are historic times. We have not seen the cattle market move this dramatically since 2003, and you know the overriding factor driving that market – BSE. Today, we’re seeing market movement the other way.

There is a celebration in the country as cattle prices continue to soar to uncharted highs. Just this week, fed cattle started at $1.45/lb. and then just kept climbing. It’s truly hard to contemplate, but there were some Prime-grading carcasses last week that were grossing $2,500!

In the aisles and hallways of the National Western Stock Show in Denver last week, the conversation understandably was dominated by the higher prices. Purebred prices were stronger than a year ago across the board, with virtually all breeds posting moderate gains from year to year.  

Being cattlemen, everyone was looking to evaluate the risk to these markets. First, we had one gigantic move in the marketplace; cattle that were sold the first of December looked like a homerun at the time, but pale in comparison to today. The industry can’t sustain this type of momentum for long, but there’s no indication that these higher trading ranges are not here for a while, as normal seasonal fluctuations look good.

In addition, everyone has been surprised about the strength of beef demand. It looks like we’ll close out 2013 with close to a 2% increase in beef demand, which was truly neither anticipated nor predicted by anyone. There are a lot of theories floating around as to why pork and poultry are struggling from a demand standpoint and beef is showing strength.

I think the return of the Japanese market with the removal of the age-restriction barrier was significant. However, I also think we’re finding that, at today’s lower consumption levels, consumers are not nearly as willing as they were previously to substitute.

That statement will probably cause my economist friends to choke on its simplicity and overreach. But when Americans were consuming 70 lbs. of beef on a per-capita basis, I think consumers were more price-sensitive and willing to exchange other proteins for beef. At today’s per-capita consumption levels, however, they aren’t as willing to substitute. And if that continues, we should be bullish regarding our ability to sustain these heady price levels for quite some time.

However, it also signals that regaining per-capita consumption will be a long and difficult road for the beef industry. Make no mistake about it, the battle for the center of the plate is an important metric, but it appears that a growing population, a slow-growing domestic economy, and a rapidly growing global middle class is poised to override price concerns and allow for expansion and profitable levels for the U.S. beef industry.

 

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Drought remains the negative. California’s drought is critical, and producers in the hardest hit areas of southern Colorado, northern New Mexico, and the Panhandle need relief just for survival. While these affected producers won’t be made anywhere near whole by disaster assistance, it would be nice for them if Congress could get a farm bill passed in order to afford them access to some of the funds included in the proposals. 

Everyone will be looking for the top and the pull back, but right now, it is time to just enjoy the ride.

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Discuss this Blog Entry 1

John Schafer (not verified)
on Jan 24, 2014

I can think of three other factors that might contribute to the improved market. The overall economy has been a little stronger than expected. The Chinese market has exploded with Australia selling there rather than to us. Our domestically produced beef is delivering a more consistently desirable eating experience since use of zilpateral was discontinued.

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What's My View From The Country?

As a fulltime rancher, opinion contribur Troy Marshall brings a unique perspective on how consumer and political trends affect livestock production.

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Troy Marshall

Troy Marshall is a multi-generational rancher who grew up in Wheatland, WY, and obtained an Equine Science/Animal Science degree from Colorado State University where he competed on both the livestock...

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