From NCBA Cattlemen’s Capitol Concerns
(National Cattlemens Beef Association lobbying group)
in BEEF Cow-Calf Weekly
Slowly, methodically and seemingly without fanfare, the cattle market has been rising since about Thanksgiving. As of late, however, the continuation of this “run” in cattle prices has started to gather attention and it has several asking how, why, and more importantly, will it continue?
On the supply side, cattle feeders placed 4% fewer cattle in feedlots for March-April-May 2010 delivery, versus the same period in 2009; and each carcass is 26 lbs. lighter compared with a year ago, according to Gregg Doud, NCBA chief economist. These lighter weights are the result of one of the longest and most difficult Midwest winters in a long time. We’ve also seen about 2% fewer culls cows and bulls coming to market so far in 2010.
The combination of these factors means that, although year-to-date U.S. beef production is flat, we should see beef supplies tighten for the balance of the spring. This suggests that cattle feeders will pull market-ready inventories forward to take advantage of these improved marketing opportunities, giving them an opportunity to improve their negotiating position with processors into the summer months.
On the demand side, the situation has improved mightily from the global economic doldrums of 2009. The lower value of the U.S. dollar and strong economic growth in Asia is producing a welcome revival of U.S. beef exports. Year-to-date beef export sales appear to be up by roughly 20% and wholesale prices for exported items such as short plate, outside skirt and chuck rolls are driving the wholesale beef “cutout” value higher.
For most of the past two years, cattle prices have struggled due to a soft U.S. economy and domestic beef demand. However, in recent days it now appears that retailers have entered the demand picture as well. With the end of Lent and some springtime weather at long last, retailers are anticipating that folks are ready to get their grills fired up. Goodness knows that beef producers are ready for spring as well and for the first time since 2007, this spring is seeing the end of red ink flowing in the cattle feeding sector and profitability across all segments of the beef industry.