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Beef Buzz News

Higher Prices Will Test Beef Demand, but Herd Expansion on the Way, Peel Says

Mon, 30 Sep 2013 17:54:55 CDT

It's been a week since the latest Cattle on Feed report from the USDA showing 11 percent fewer feeder cattle being placed in the feedlot in the month of August than one year ago. It also showed seven percent fewer cattle on feed overall.


Oklahoma State University Extension Livestock Economist Derrell Peel has examined the numbers and tells Radio Oklahoma Network Farm Director Ron Hays in the latest Beef Buzz that the wholesale boxed beef price will creep up beyond $2 per pound and producers will get a test to find out how much demand there is at those prices from the consumer. (You can listen to the Beef Buzz by clicking on the LISTEN BAR at the bottom of this story.)


"I really expect that we will move the choice boxed beef back above that $2-a-pound mark before the end of the year-perhaps quite a bit above it, at least at times. And, then, I think, that demand question really takes precedent at that point and it's a two-part concern on the part of demand. One is how much will consumers buy? But beef isn't one product, it's many different products. I think the more important question is 'What kind of adjustments will the consumer make in terms of different products?' How will they substitute among products? And, obviously, they'll change the frequency of some products. So, we don't really know what to expect."


Peel says that demand will really become critical toward the end of the fourth quarter and on into 2014. Competition will be tough, especially with ample supplies of pork and poultry at lower price points. He says part of the reason for the current tightness in the beef market is the number of heifers being held back for herd rebuilding.


"I believe this was the fifth week in a row of double-digit year-over-year decreases in beef cow slaughter. It's been averaging about 14 percent down on a weekly basis compared to this time last year. And that's kind of what we expected, really, the whole year to be."


Peel said cow slaughter was higher in the March to June period, but that was reflective of dry conditions and a shortage of hay which made it imperative that producers sell cattle.


He said good rainfalls this summer and larger forage harvests have put producers in a good position to hold back cows and heifers for herd expansion. He said that could put a "flat spot" in marketing numbers for the next couple of years. He also said that with a lot of older cows being culled due to drought, that leaves ranchers with very young and very productive herds.


"What I think all that means, in short, is that in 2014 we could go from being in liquidation in 2013 to significant expansion in 2014, perhaps as much as up to two percent in that first year and that would be unusual for that first year of an expansion base."


Peel predicts that the cow herd numbers will hit rock bottom in January of 2014 and grow from there.



The Beef Buzz is a regular feature heard on radio stations around the region on the Radio Oklahoma Network- but is also a regular audio feature found on this website as well. Click on the LISTEN BAR below for today's show- and check out our archives for older Beef Buzz shows covering the gamut of the beef cattle industry today.



   



   

Derrell Peel talks with Ron Hays about beef demand, higher prices and herd expansion. right-click to download mp3

 

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