Low Inventory Leads to Uncertainty in Cattle Markets
Bernt Nelson
Economist
Chad Smith
Associate News Service Editor, NAFB
With U.S. cattle inventory at the lowest level in more than seven decades, farmers and ranchers are facing uncertainty about the future. Chad Smith has more on what market conditions can tell us.
Smith: A pair of recent market reports paint a picture of cattle on feed supplies remaining steady even as cash cattle prices moved higher. Bernt Nelson, an economist for the American Farm Bureau Federation, says the Cattle on Feed report is a good indicator of what’s coming in the market.
Nelson: A lot of that has to do with kind of what's been happening with our cattle on feed numbers. And I think it's important for individuals to remember, farmers to remember that our cattle on feed numbers currently are not really bullish, but there are some things happening in there that can kind of lead people down another direction.
Smith: Nelson says that despite higher cattle supplies, overall market conditions mean that cash prices aren’t necessarily going down.
Nelson: Overall, cattle on feed came in at 11.6 million head. Now this is pretty close to where things were at this point last year. Placements were down around two percent. Marketings were up around two percent. There are a lot of fed cattle on the market right now. There's also good packing margin occurring right now. Having a lot of those cattle available, typically when we think of higher supplies, we think of lower cash prices, but having those packer margins a little bit higher right now has allowed them to kind of bid for that.
Smith: Nelson says that these continually high retail prices could eventually lead to consumers shifting demand away from cattle to other protein options like chicken and pork.
Nelson: Up to this point, since that July time frame, and we've seen record highs made in a total of six of the last seven months of this year entirely. So, going back even a little bit further behind that [in] July and so, beef is still going up. Right now, I don't think the overall choice in the beef cutout can go a whole lot higher before we start seeing some consumer demand shift away. You know, our consumers are getting tired. The inflation story has gone on for quite a while and these higher prices are exhausting.
Smith: For more information, go to fb.org/marketintel. Chad Smith, Washington.
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