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Agricultural News


Cattle and Beef Markets are Not Independent from Global Markets Says OSU Economist Derrell Peel

Mon, 02 Jul 2018 12:32:01 CDT

Cattle and Beef Markets are Not Independent from Global Markets Says OSU Economist Derrell Peel Mondays, Dr. Derrell Peel, Oklahoma State University Extension Livestock Marketing Specialist, offers his economic analysis of the beef cattle industry. This analysis is a part of the weekly series known as the "Cow Calf Corner" published electronically by Dr. Peel and Dr. Glenn Selk. Today, Dr. Peel reviews the relationship that the cattle and beef markets have with the global marketplace.

"For the cattle industry, July 4 not only is a celebration of our nationís independence but also represents summer beef demand for grilled steaks and burgers. The holiday falls on Wednesday this year and doesnít stretch into a long weekend thereby limiting activities and most likely beef demand somewhat as well. It also marks the mid-point of 2018 and an opportunity to consider the second half of the year compared to the first six months of 2018.



"Despite increased beef production in 2018, up nearly four percent so far this year, beef demand has been quite strong and has limited beef and cattle price pressure in the first half of the year. Domestic beef demand has been buoyed by strong a macroeconomic performance including a declining unemployment rate. Foreign demand for U.S. beef has boosted total beef demand with a 13 percent year to date increase in beef exports through April. Strong year to date beef export increases have been led by South Korea, Mexico, Hong Kong, and Taiwan with number one Japan up slightly this year.



"The second half of the year could bring more demand challenges. Numerous countries have implemented retaliatory tariffs in response to U.S. tariffs on steel and aluminum. In some cases tariffs include beef and will have a direct impact on beef markets. The bigger impacts are likely to be indirect in a range of impacts on other markets. Other meats, especially pork, are more directly impacted among the wide range of U.S. products subject to tariffs. Negative impacts on exports of other meats means that more total meat must be absorbed in the domestic market. Total U.S. red meat and poultry production is expected to increase nearly three percent year over year to a record level over 102 billion pounds. Any slowdown in meat exports will undoubtedly add pressure to domestic meat prices.



"Tariffs on U.S. products will impact domestic GDP, slowing macroeconomic growth and reducing domestic spending. At the same time, U.S. tariffs on steel and aluminum from numerous countries have been broadened, in the case of China, to include a host of other imports. This will impact domestic prices for products manufactured with imported inputs as well as directly increasing prices on imported consumer products. Tariffs on U.S. imports are largely paid by consumers as higher retail prices in the U.S.   All of this will negatively impact domestic spending and employment with likely negative consequences on domestic beef demand.



"Beef production is projected to grow over four percent in the second half of the year, contributing to a three percent increase in total meat production. Negative impacts on beef and other meat demand may have bigger price implications in the coming months as markets struggle to absorb large meat supplies in the U.S."



   

 

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