Thursday, December 08, 2016

Cattle Prices: Windfall to Bear Maul

Cattle markets have disappointed for most of 2016, but it was a dive into extreme territory in mid-October that brought producer frustration to a boil. Auction prices did nothing but retreat from mid-August, leaving calf and yearling prices 30% below 2015 and 60% below 2014. It was nearly Halloween before the summer lows were established. How did cattle markets fall that far that fast? That’s the question many ranchers are asking as they try to find justification in a market that has erased essentially all of the $500-plus per cow average profits they posted in 2014. In October, we described how market direction will be dictated by increasing supplies of red meat and poultry. (See “A Mountain of Meat Looms,” Drovers, Oct. 2016, page 7.)That issue hit mailboxes about the time the bear was mauling all classes of cattle, driving fed cattle prices to less than $100 per cwt for the first time since December 2010. At one point, calf prices dropped 13% in a three-week period, causing most analysts to declare them undervalued. Discussions of USDA data-sets such as red meat and poultry supplies, however, have fallen flat in ranch country. “How can we have an over-supply of beef when just two years ago we were told cow numbers were at 60-year lows,” is a common question among ranchers. And, they wonder, “Why haven’t retail beef prices declined accordingly?”...more

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