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Strong demand supporting beef and cattle prices
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Strong demand supporting beef and cattle prices

Beef in ffedlot

Spring has brought some optimism to cattle markets, with fed cattle and beef cutout markets moving higher.

David Anderson, professor and Extension economist for Texas A&M, wrote in his “In the Cattle Markets” column for the Livestock Marketing Information Center that strong demand has helped markets move higher.

“After languishing for weeks at about $114 per cwt. the fed cattle market has sprung to life,” Anderson said. “Fed cattle prices hit $123-124 in more Northern regions and closed the week at $121 in the Southern Plains. From 2015-19 the seasonal price increase has been about $6 per cwt, or 4.3%. Prices dipped as low as $109 in late January, making this seasonal run larger than normal, so far.”

The surge has also shown in Choice and Select beef prices.

“Surging demand and expectations of demand continue to drive prices higher,” Anderson said.

Anderson said the strong demand is a continuation of the pre-pandemic trend.

“It’s worth remembering that prior to the pandemic, beef demand had been on several good years of strength,” he said. “A growing economy, falling unemployment, and consumer preferences trending towards higher USDA quality-grade beef were building demand. 2020 did not slow beef demand, even with the increase in unemployment.”

Anderson says pent-up demand should boost prices.

“One macroeconomic statistic that I find interesting is Personal Savings as a Percent of Disposable Personal Income,” he said. “Prior to the pandemic, since 2011, savings had averaged about 7%. When widespread shutdowns hit in the second quarter 2020, GDP fell 9%. With no place to go to spend, savings skyrocketed to 26%. While they have since declined to 13%, that is a lot of money for folks to spend to fund some pent-up demand fun. Economic reopening combined with people spending and tighter beef supplies later in the year should suggest some optimism.”

Anderson said production is looking to increase but has been somewhat in check.

“Not to forget the supply side of the market, beef production in March was slightly below March of 2020, which was right before COVID shutdowns hit packing plants,” he said. “As expected, for the last 6 weeks we are producing more beef than last year, and for a better comparison even more than in 2019. Steer and heifer dressed weights have not recovered from winter storm Uri, and being equal to a year ago have kept production in check.”

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Ben Herrold is Missouri field editor, writing for Missouri Farmer Today, Iowa Farmer Today and Illinois Farmer Today.

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