Tuesday, January 17, 2012

6 million more cattle?

Supply and demand may seem like just concepts from a dusty book. But in today’s cattle market, those fundamentals govern profit and loss, and point toward the future. “Regardless of the commodity we talk about, the demand for it is going to determine long run supply,” says livestock economist Scott Brown, University of Missouri. He sees potential for significant expansion if more herds produce premium Choice or Prime beef. Amid a challenging global economy in the last five years, supply and demand highlighted differences within the beef category from the top to low end. Demand for high-quality beef increased more, even as all beef prices rose in response to dwindling supplies. Production input costs continued up, too, but cattle prices climbed to cover costs for most ranchers. “If you would have asked any economist three or four years ago what $7 or $8 corn would have done to this industry, we would have said there wouldn’t have been one,” says Brown. “Well, we are learning that we can feed corn at those prices, but it takes much higher fed-cattle prices than we would have ever thought. So we are seeing the adjustment.” It’s another example of the fundamentals at work. The squeeze between costs and cattle prices put enough strain on producers over time that many of them reduced their herds or went out of business, steadily reducing the calf supply. So many hard decisions to give up the ranching life eventually pulled prices up for survivors in the industry...more

1 comment:

Anonymous said...

A better question is why is $7-8 corn being made into ethanol when we have plenty of oil and gas in this country at a much cheaper price.
Barrack Hussein Obama is choking the life out of our natural resource production capability, and Mitt will put a cap and trade on it if elected.
Vote for Newt and return this country to it's fundamental roots!!