Market Fundamentals Keeping Beef Prices High, Derrell Peel SaysThu, 13 Mar 2014 17:01:51 CDT
Livestock markets made a run higher in January, backed off a bit and have then trended higher again in March. Dr. Derrell Peel, Oklahoma State University Extension Livestock Market Economist, tells Radio Oklahoma Netork’s Ron Hays it boils down to market fundamentals. (Click on the LISTEN BAR at the bottom of this story to hear their conversation.)
“Obviously, the underlying fundamentals are the very tight supplies and how vulnerable we are in this situation. We’ve continued to have bad weather which has affected supply and demand… We’ve taken boxed beef now up above those January highs to new record levels. We’ve taken fed cattle prices, recently, up above the January highs to new record levels so the rollercoaster continues.”
Bad weather has impacted performance of cattle in the feedlots, Peel says, causing packers to try to pull supplies forward hence the rise in beef prices. The bad weather has also kept people indoors and away from the grill and that is not all bad, he says.
“The best way I know to describe beef demand is ‘So far, so good,’ at this point. We’ve gone through the winter. We’ve gone through these challenges where we have had a lot of disruptions. Things that are oftentimes a negative on consumer demand-and if they are negative, we’re sure not seeing it at this point in time. Certainly the seasonal demand in grilling season is yet ahead of us.”
He says the higher prices right now are reflective of a market that is simply trying to match available supplies with demand. The stronger prices may carry forward for several more weeks before supplies recover sufficiently to exert downward pressure on the markets.
Stocker prices have remained high and will continue to move higher as demand increases for summer grazing, Peel says. He says the same is true for replacement heifers being used for herd expansion.
The key to keeping prices at those levels will be moisture. Topsoil moisture is vanishing quickly and rains are needed soon to spur pasture growth if markets are to maintain prices at this level, Peel says.
“The next 60 days will be really critical in our ability to sustain and follow through with these expansion plans. The forage base is very vulnerable. The first half of the year is the most critical part of that. So, if we have trouble in the first half of the year, even if we get some rains later, which they’re sort of talking about now, that will help and minimize the loss, but you really won’t make up for losing the first half of the year.”
Peel says that producers need to have a wide range of management plans waiting in the wings from defensive to offensive. He says producers need to take stock of forage supplies and water in making their calculations.
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