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Beefs and Beliefs

Can beef demand hold prices up?

Alan Newport Cow and calf on pasture
Good beef markets are always dependent on some degree on decent conditions in the economy. Will prices stay reasonably good with the onslaught of protein in 2018.
Central bank money flows could keep world economies alive and that would prop up beef demand.

I have reason to believe this coming year we'll see some form of economic strength, even though our economic "recovery" since 2008 has been pallid and is now the third-longest in history.

Beef has done pretty well, although I realize there's a lot of whining and handwringing based on the big fall from the precipitous price heights of 2014. Further, even with an increasing supply of beef and huge supplies of chicken and pork, beef demand (including exports) was pretty nice the last year and has propped up the price above where some pundits thought it might be. In recent days, the Steiner Consulting Group, doing analysis for the Chicago Mercantile Exchange, said although shipments from December 2017 indicate a modest slowdown, "the trend is for US beef exports to continue to increase in Q1 of 2018 vs. 2017 levels."

But that's not where I'm pinning my hopes. The truth is, the world is awash in money, and even though the Federal Reserve claims it is now shrinking its balance sheet by not renewing $10 billion in bonds every month, I'm not so sure. Further, other central banks in the world are giving signs they are still willing to expand their money fabrication, and that money has been flowing into US stock markets and other investments, as well.

I'm not a fan of central bank money manipulation, but it has propped up the markets and made the rich richer, and that helps push beef. Therefore, our industry has gained from it with our premium protein status. Trickle down to the masses, though? Not so much. Ground beef is still the new steak of the masses, as we've discussed many times before. It is the only beef product that can compete with chicken on a price basis, and ground beef cannot support the industry as it exists, nor in any form similar to the current one.

For your elucidation, I am publishing a chart from an economic newsletter to which I subscribe, by an author named Nomi Prins. She shows pretty clearly how the stock market booms have been fueled by this funny money, as I call it, or "dark money," which she calls it because the majority of us can never see it.

Incidentally, this is very similar to balance sheet-stock market combos for the central bank of Japan and the Nikkei 225 index and the Bank of England and the FTSE 100.

Nomi Prins

The creation of money by the Federal Reserve and other central banks has fueled stock market runs and that has helped beef sales and demand.

Further, Trump's appointment of Jerome Powell to the Federal Reserve suggests continued easy money, in addition to more appointments of Fed governors who approve of easy money.

Admittedly, there are many things which could crash the markets, most of all a sort of exhaustion where the bears finally outweigh the bulls and a downturn ensues. A big downturn could also be caused by "black swan" events such as a likely Chinese devaluation of money, or war with North Korea. But who knows.

I now believe most market crashes are orchestrated, and you can find some interesting information on this topic from an author named Wayne Jett, and his book The Fruits of Graft: Great Depressions Then and Now. A four part interview with Jett was done recently by independent journalist Sarah Westall. Part One begins here on her YouTube channel and the next three are linked to that one.

Things look much better to me than they did a year or two ago, but I don't trust these markets at these heights. Yet I've been wrong for a long time now. I still believe you should protect your assets by keeping debt manageable and by selling on contracts whenever possible.

Regardless, I'm praying we see a profitable 2018.

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