EDMONTON – A major U.S. cattle group is confident that the industry’s bull market will maintain beefy prices for farmers and packers.
Gregg Doud, chief economist with the National Cattlemen’s Beef Association, told the FarmTech show in Edmonton last week that feeder calves will remain high for the immediate future despite high grain prices that might normally cripple the cow-calf industry.
Margins are usually diverted from the production stream when corn and other feed cereal prices rise. Cattle feeders will endure short-term losses before passing higher feed costs onto primary producers.
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Doud said that for a change the higher feed costs are rising up the food chain toward the consumer.
“Demand is global and some of the world’s largest populations are buying (beef),” he said.
“There is a limited supply and that results in higher prices for packers, wholesalers and consumers.”
Anne Dunford of Gateway Livestock Exchange in Taber, Alta., said she feels the supply issue will not be fixed soon and consumers will pay more.
She said packers are also making money. As a result, the entire system seems healthier than it has been for some time.
American packers are less concerned about country-of-origin labelling because of tight supplies of fed calves.
Dunford said the market for trim is stronger than ever and buyers are paying premiums for offal.
The whole carcass is bringing more money, which encourages packers to pay more.
She said the premium middle meats continue to struggle for higher prices.
Doud said the supply of grinding meat from other countries for U. S consumption is low because the Australian dollar and South American currencies are up relative to the U. S dollar.
This makes Canadian and domestic beef more attractive.
Exports to Japan have been heavily influenced by the low U. S dollar despite under 21 month slaughter rules, making North American beef more attractive there.
Dunford said there is little on the horizon that will mitigate the supply shortage.
“American producers aren’t responding to the price signals they have been getting for the past year or so. They aren’t expanding their herds,” she said.
“I think it might be demographics. They are 10 years older than you guys, and you are in your 50s,” she told producers at FarmTech.
“They won’t expand because they don’t want or need the extra work.”
As a result, Doud said record prices paid for feeders and fed cattle are expected to move even higher with consumers paying the difference.
Dunford said the price of hamburgers can move from $1 to $2 and the consumer will continue to buy them.
Cow and heifer slaughter might be slowing slightly from near record rates, but Doud said it remains high, partly because of strong grinding beef prices.
“Fewer females is a signal to the buyers: pay more,” he said.
Drought in Kansas, parts of Nebraska and Colorado is adding to supply side decision making at the cow-calf level, he added.
Doud said corn prices continue to rise and fat cattle are moving with them.
Futures prices for December 2012 fed calves is $117 per hundredweight, compared to last year’s 95 cents and the current $1.05.
Calgary reporter Barbara Duckworth is attending the National Cattlemen’s Beef Association’s annual convention in Denver, Colorado, this week. We will provide coverage in upcoming issues.
