Peel Believes Heavy Weight Cattle Helping Crash MarketThu, 24 Sep 2015 16:54:45 CDT
Wholesale boxed beef prices, slaughter cattle prices, yearling and calf prices have all retreated in recent days. Oklahoma State University Extension Livestock Marketing Specialist Dr. Derrell Peel said what’s going on in the beef and cattle markets has to do with more than the basic fundamentals of the beef cattle industry.
“You know, there’s a lot of big picture macro-economic uncertainty, global market uncertainty, that has effected many markets, including cattle markets and agricultural markets broadly speaking,” Peel said. “So, a lot of concerns about China, slowdown in the Chinese economy and the ripple effects that will have on many markets. It’s kind of ironic, that we think about it impacting cattle markets so much because we don’t officially have trade access in beef with China and yet it has an impact and so we’ve seen a lot of those impacts. It translates back into the U.S. economy at the macro-economic level and then down through futures markets into commodity markets and cash markets as well.”
Peel said this recent downturn in the cattle market over the last 45 to 60 days has tracked the trend of the Dow Jones and the NASDAQ. He said the stock market is one of the places where a lot of that uncertainty gets reflected and there is a lot of volatility.
“Trade in the stock market is related then to trade in the futures markets for commodities, so all of those are kind of tied together and we see those effects get passed through the system that way,” Peel said.
A combination of these macro-factors as well as some fundamentals are hitting these cattle markets really hard. From the wholesale level, all the way through the pipeline to the cow-calf operator. On the fundamental side, Peel said he has been watching the increasing carcass weights.
“Feedlots have struggled with poor margins, lots of challenges there and one of their responses to that has been to slowdown the rate of turnover of cattle in the feedlots,” Peel said. “They are feeding them longer, feeding them to heavier weights and it really hasn’t been a problem up until now, but I think we’re at a point now where we have a relatively large supply of very, very heavy cattle, that’s beginning to weigh on the market. An so, even through overall numbers are still fairly tight, we have a little bit of a supply issue within that tight bigger supply and I think that’s something we’re going to have to deal with. We’re starting to see some additional market incentives to move these cattle out. We’re going to have to get ahead of these heavy cattle, otherwise they are going to be increasing drag on the market.”
It’s not just the number of pounds on these heavier weight carcasses, but it’s also the size of some of the cuts that’s a worry further down the value chain.
Radio Oklahoma Network Farm Director Ron Hays featured Peel on the Beef Buzz feature. Click or tap on the LISTEN BAR below to listen to today's Beef Buzz.
The Beef Buzz is a regular feature heard on radio stations around the region on the Radio Oklahoma Network- but is also a regular audio feature found on this website as well. Click on the LISTEN BAR below for today's show- and check out our archives for older Beef Buzz shows covering the gamut of the beef cattle industry today.
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