What's that foreign feeling in the air at
your local livestock auction? It's a strange euphoric feeling we
haven't felt since the good old days way back in 2014. Could it be, nah,
it couldn't be optimism, could it?
Last autumn we'd all been a bit down in
the dumps due to historic declines in the cattle market, but ever since
Donald Trump got elected to be our 45th President cattle prices have
been on a steady rise. This begs the question, was Trump responsible?
Are market fundamentals now giving cattle prices a more firmer footing,
or are prices just being driven by the paper players in futures markets
who are playing momentum swings? Just how much, if any, of the renewed
optimism that has cattle traders now putting money back on the table,
due to a Trump bump?
On The Other Side
Ag economist David Kohl compared the rise and fall of cattle prices to climbing Mount Everest and says we are now safely on the other side. Cattle prices bottomed out in the fall of 2016, right before the election. Back then, 550 pound steers were fetching, on average,$1.34 per pound and 750 pound steers were selling for $1.22. But in the first week of May 2017 those same 550 pound steers were bringing $1.68 for a 25 percent rise since the election, and 750 pounders rose 20 percent to $1.46. Granted, those prices aren't the highs we saw back in the glory days of 2014 but they really aren't all that bad.
It doesn't seem that long ago when we
were all wringing our hands and worrying as we pondered the almost
guaranteed election of Hillary and a further deterioration in the cattle
market. Farm economists were predicting even lower lows and the NCBA
was urging Congresspersons that we simply had to have the passage of the
Trans Pacific Partnership or we'd revisit the wreckage.
It's amazing what one election can do!
Now we have President Trump dismantling the regulators and sending the
TPPers packing. And lo and behold, instead of falling, the market rose
dramatically. Each week finds packers caught short of their own
inventory and having to pay sharply higher prices to fill orders. One
week saw cattle rise $10! IN ONE WEEK! The Sterling Profit Tracker
showed for the week ending May 12th that feedyards saw $536 per head
gains. To take advantage of the profit margins packers were sending
ever-greener cattle to town.
So many green fat cattle are being sold
that the spread between Choice and Select grew to $20 and carcass
weights are down 3.8 percent With so much less beef being produced, and
retail ground beef prices at their lowest point in five years, the beef
market is sizzling. USDA's cold storage report indicated that red meat
supplies in freezers were down 4% from last year and the market for beef
seems to be creating its own tailwind.
Compare this to post-Trumpian times when feedyards were holding cattle
long after their due-date for lack of bids, hoping and praying for
higher prices. Carcass weights grew to an all-time high. Now we have
even grumpy cattle traders calling the Trump rally "spectacular" and
there have even been sightings of that most endangered species of all:
the wrinkle horned flush green smiling cattle feeder.
Sizzling Like A Good Steak
Cooler heads aren't giving Trump all the credit. They contend the current market is being driven by packers having to do something totally out of character: they are actually bidding competitively to keep up with domestic beef demand and export sales. It seems the American consumer has reclaimed her joy of eating quality beef at an affordable price.
In 2014, when beef prices at every level
were sky high, meat consumption fell to 202 pounds per person. That was
down 9 percent from a record 222 pounds produced in 2007. Now in 2017
per capita red meat and poultry consumption is on pace to reach 218
pounds and economists are predicting American consumers will eat 223
pounds of meat per person in 2018, a new record.
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