Uncertainty has caused price volatility for cattle markets, Stephen Koontz, ag economist for Colorado State University, wrote in his “In the Cattle Markets” column for the Livestock Marketing Information Center.
“Fed cattle, feeder cattle and calf prices have been displaying substantial volatility since April,” Koontz said. “There is simply much uncertainty about the path through the rest of the year. And it is unlikely the volatility will dissipate.”
“There is considerable optimism about cattle markets,” he said. “Beef margins are at extraordinary levels and boxed beef product cut prices are rather high. And this is in the face of substantial production.”
There seem to be a number of factors at work.
“There is some refilling of meat product pipelines, the supply chains continue to adjust to changes in product flows, and there is substantial improvement in consumer demand,” Koontz said. “All three are occurring, strengthening prices, and some portion will likely persist into the future. How will these markets react if production tightens some this fall? It appears unlikely that downstream prices and packer margins will weaken.”
Exports are also providing support for prices.
“There are also strong exports of all red meat proteins,” Koontz said. “Pork and beef exports are not showing substantial gains, but they remain strong. What is showing substantial gains are byproduct values — in particular beef byproducts — and these valuations are largely impacted by exports.”
However, some pessimism remains about the markets as well.
“Packers are running substantial volumes,” Koontz said. “Add to this concern the return of feed grain prices to strong rallies.”
Slaughter trends are also adding to the mix of positive and negative news.
“Through the month of May the elevated beef cow slaughter has communicated the drought impacts,” Koontz said. “There was some evidence early in the year of cows moving from the west and northern plains to the moisture laden southeast. That has likely not stopped, but beef cow slaughter has increased counter-seasonally. This is of course bearish news in the short-term but bullish news long-term.”