Volatility in the increasingly sensitive cattle markets can be expected to remain for several more weeks, according to Derrell Peel, Oklahoma State University extension livestock marketing economist.
The United States Department of Agriculture mid-August cattle-on-feed report increased supply pressure on the markets, with another month of unexpectedly large feedlot placements reported for July, Peel said.
Also, placement weights indicated many of the cattle were heavyweight feeders that will turn around fairly quickly in the feedlot, he added.
Beef production will soon be above levels of a year ago and will remain higher for the rest of this year, Peel noted.
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USDA’s latest corn crop estimates are lower than projected earlier, so the possibility of higher corn prices may have mixed impacts on cattle markets, he said. There may be additional pressure on feeder prices. However, higher corn prices may result in lower slaughter weights, thereby reducing the supply pressure of increased slaughter in late 1997 and early 1998.
Recall causes unstable market
Effects of the hamburger meat recall in both the American and export markets may be the biggest uncertainty in the beef situation for a while longer, he said.
“In some respects, beef demand has been reasonably strong in recent months. However, strength of retail broiler and especially pork prices relative to beef may account for much of the strength.
“Beef has been a good buy, and that has maintained good volumes of meat moving through retail channels. In the next several months, pork production is expected to increase significantly, so lower retail pork prices should put pressure on beef demand,” he said.
Lower priced beef
“At the same time, the mix of beef products in the market will be changing. For the past 15 months or so, cow liquidation has contributed to a higher-than-usual percentage of hamburger and lower-value meat. That has allowed beef prices to be especially competitive compared to pork and poultry,” he said.
“In the next year, the slaughter mix will consist of a higher proportion of high-value meat. The question of when and how much pork production expands may be critical in coming months.”
Peel said that, unless all those factors combine to create a major market wreck, improving supply conditions may strengthen cattle markets in 1998.
“So far, heifer slaughter still is high, and beef cow slaughter – although down from last year – still is high enough to suggest some liquidation.
“It appears we will end 1997 with one to two percent fewer beef cows and not enough heifers to expand so rapidly in the foreseeable future,” he added. “Beef production is likely to decrease up to two percent in 1998.”
Competing meat supplies may be the key, Peel said. Estimates are for a 1998 pork production increase of four to eight percent.
“The inherent strength of beef demand in the face of ample supplies of competing meats will determine how much beef benefits from improved cyclical supply impacts,” Peel said.
