Friday, September 23, 2016

Thompson Research Center Field Day: Economic Opportunities for Missouri Cattle Producers Facing Lower Cattle Prices

“Supply and Demand works!” said Scott Brown at the Thompson Research Center Field Day. We have seen huge increases in meat production in the last two years. In 2014, we saw record cattle prices. Beef producers saw high prices, so they produced more beef. This of course lead to lower cattle prices.
The strengthening dollar has also lead to fewer beef exports. Lots of beef production but very little exports. We may not be done with lower cattle prices. A $1.10 looked a lot better on the way up than on the way down.
“Scott, where is the bottom at? Guys, if I knew where the bottom was at I’d be rich by now” Brown said.
If you had bought LRP or futures in the spring, you would be much happier right now.

When comparing 2008 to 2016 cattle inventory, it looks like Texas, Oklahoma, and Missouri still have a lot of room left to grow.

If you look at cattle return for 2016, it is the 8th or 9th highest all time. In 2015, cow-calf producers were still in charge. Now, the cow-calf producer is only seeing 65% of the value, compared to 90% in 2015.

We may be starting to find the bottom. Fundamentals suggest we might see higher prices, but there is still considerable down turn risk.

Do you have a marketing plan? Doing the same thing year after year is a plan, but it sure isn’t responsive to the market.

Is it a strategy to reduce risk to focus on cattle that grade higher? Prime has stayed strong over time.
There is a lot of volatility in the Choice-Select spread. CAB-Select spread continues to be a premium, but the Prime-Select spread continues to be the strongest premium. New products for consumers also provide premiums, especially for early adopters. It pays in the long haul to focus on what consumers want.

Prime boxed beef prices has remained flat in 2016, while Choice and Select boxed beef prices have declined all year.

Supply is not very responsive to negative returns due to fixed costs.


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