Beef Buzz News
After Soaring Up and Crashing Down Cattle Prices in 2014-15, OSU's Derrell Peel Sees More Stability in 2016
Mon, 29 Feb 2016 11:17:48 CST
Oklahoma State University Extension Livestock Market Economist Derrell Peel has been non stop in his speaking engagements across not just Oklahoma- but literally from coast to coast. Dr. Peel has talked to cattle producers in Pennsylvania, Kentucky, Florida, Mississippi, Alabama and more in recent weeks- and this past Friday, he was in southern Oklahoma talking to Oklahoma and Texas producers that were a part of the Texoma Cattlemen's Conference.
Radio Oklaoma Ag Network Director of Farm Programming Ron Hays talked with Peel in advance of his presenation on Friday- and Peel's comments are being featured over the first part of this week on the Beef Buzz.
Today- he talks about cattle prices soaring higher in late 2014 and early 2015, before crashing back to earth in the latter part of 2015. You can hear his comments about that by clicking on the Listen Bar below.
In addition to his comments to Hays, here are his thoughts from the weekly column that he pens in the electronic newsletter called Cow Calf Corner. These comments line up with the complete interview that Hays and Peel did on Friday, which is available here.
Derrell Peel writes: "Feeder and fed cattle prices are currently at roughly the same levels as in lateDr 2013. In the intervening 26 or so months, cattle markets have been on a rollercoaster that took cattle prices higher, faster than ever imagined, followed by a sharp correction in late 2015 that was more abrupt and severe than anyone could anticipate. This has left cattle producers cautious and somewhat hesitant about what to expect going forward. One of the challenges through this period has been the fact that many of the cattle and meat market indicators, patterns and relationships have behaved very unusually leaving producers and analysts at a loss to understand and anticipate market movements.
"Recently, however, there are number of indications cattle markets may be returning to somewhat more typical behavior. After the worst year ever in 2015, feedlot margins are moving back to levels will lead to positive returns for feedlots. This process is not complete and will likely continue through the next few months. Within feeder cattle markets, the margins or value of gain across weights just recently has adjusted to reflect feedlot cost of gain. The value of gain calculates to the $0.70 - $0.80/pound range in the past couple of weeks. This suggests that feedlots are pricing feeder cattle in a manner that reflects equilibrium across weights. This is the first time in many months that the value of gain in feeder prices is consistent with broader cattle market conditions.
"On a very different note, wholesale beef markets appear to returning to patterns not seen for many months. So far in 2016, middle meats are advancing or holding value relative to weaker end meats. This long term tendency for middle meats to be the strongest part of carcass value has been reversed much of the time in recent years, going all the way back to the recession in 2009. Retail beef prices peaked in mid-2015 and are working lower as beef production begins to grow. Similarly, the ratio of retail beef prices to pork and poultry prices pushed to unprecedented levels over the past two years and has now peaked an begins adjusting back to more typical levels. The retail meat price ratios have been an impressive indication of strong beef demand but the fact that the retail price ratios are returning to more typical levels is an indication of more relative stability in meat markets.
"Finally, perhaps the most obvious sign of relative stability is the fact that feeder and fed cattle and beef markets are exhibiting mostly seasonal behavior so far in 2016. Dramatic price trends, both up and down over the past couple years have overshadowed seasonal market tendencies. Though cattle and beef prices are expected to trend lower over the coming months, that trend will not be pronounced and markets are expected to behave much more seasonally.
"While cattle and beef markets will no doubt continue to experience volatility, especially related to external macroeconomic and global uncertainty, it is encouraging that many of the internal market indicators are swinging back to more typical levels. This indicates a degree of relative stability in cattle and beef markets that has not been there in recent months. "
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.
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