Market fundamentals driving beef pricesMarket fundamentals driving beef prices
• There is a shortage of cows which produce feeder calves and produce the high quality beef we enjoy.• In addition to fewer finished steers coming to market, the cow shortage means there are fewer of them to slaughter for hamburger and other lower quality cuts.
April 12, 2012
Allen Greenspan famously attributed high stock prices in 1996 to “irrational exuberance.”
That is not the case for current high beef prices. Market fundamentals are driving the increases.
There is a shortage of cows which produce feeder calves and produce the high quality beef we enjoy. In addition to fewer finished steers coming to market, the cow shortage means there are fewer of them to slaughter for hamburger and other lower quality cuts.
To be sure we are harvesting more pounds of beef per finished beef animal today than ever before, so it takes fewer to produce the same amount of beef. However, this does not compensate for the cow shortage.
Exports are another fundamental fact driving the beef industry. We sell other countries all types of beef products.
Some think steak is the only exported beef product — not true but it is in great demand.
Would you believe beef tongue has significant appeal to some and they will pay good money for it? My grandfather fixed it cold with mustard, served on a sandwich — good eating.
The point is beef is selling around the world and United States beef is at the top of the shopping list of those who can afford it.
These two points help explain the historically high beef prices, both on the hoof and in the supermarket. However, Randy Blach of Cattle Fax suggests there is a correction in our beef price future. Will you be prepared?
Timing the market is nearly impossible, so stick to your usual marketing plan. Raise calves as you always have, putting on gains and selling them at your “market ready” weight when you usually do.
As the work by Kevin Dhuyvetter at Kansas State suggested, what you do with your income has more to do with your profitability than the amount of income you make.
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