Beef Buzz News
Cattle Market Looks Strong as We Head for the 2019 Finish Line- Ron Hays Talks Specifics WIth Don CloseFri, 15 Nov 2019 07:21:28
Radio Oklahoma Ag Network Farm Director Ron Hays caught up with Don Close, Senior Animal Protein Analyst with Rabo Agri Finance at the National Association of Farm Broadcaster's Convention in Kansas City to talk markets. The Cattle markets in recent weeks have been really good. Close contends “Its been an incredible rally. You know we started off the mid-summer/late summer with the fire and we were so demoralized there for 2-4 weeks, but demand in the market, both domestic and even in the export market has just continued to be phenomenal”
When we think about the aftermath of the fire (at the Kansas Tyson plant) we have almost been dating things as “pre-fire” and “Post fire” and it seems there was a bit of an overreaction on the wholesale boxed beef trade- which spiked higher right after the fire as retailers and even Tyson scrambled to secure supplies just ahead of the Labor Day holiday. Close says while boxed beef prices went up- cash cattle prices dropped but "We thought that with the 6% decline in fed slaughter capacity, that the decline in fed cattle prices was really within line of the elasticity expectations.”
If we had a surprise in that fire situation it was right in front of those Labor Day purchases because retailers were short-bought and cutout values actually ran higher. Close adds “The Post fire activity of the packers, I think with Tyson shipping cattle to other locations and the other packers picking up the slaughter rate, especially on Saturdays, everybody pitched in a did a really good job of keeping the market afloat”
Close says the other surprise in the market is that there is so much of Australia-New Zealand product going to China and South East Asia instead of coming to the United States. So as a result Close says “That has forced, or enabled, depends on how you look at it, but its caused the U.S. patty manufacturers to be buying whole muscle cuts from the chuck and the round to offset that supply and that has been the huge driver in cutup value” Close goes on to say that we are still looking at something between 55 and 60 percent of total domestic beef consumption being sold as a ground product, “So yes, it’s not our price leader but it is a critically component on total volume" referring to the hamburger market here in the US.
On the live animal side of things- we asked Close what he sees as the outlook is for beef/cow numbers as we start 2020. “If you look at the percentage of heifers that we have in the on-feed mix, on if you look at the percentage of the heifers, we have in the fed slaughter mix we have stopped expansion.” Close adds that while cow slaughter has been aggressive, he hasn’t seen any ratios that make him think we are liquidating cows, however they have stopped the expansion of females entering that production phase. Close projects the cattle numbers for 2020 will be flat, but that 2021 could see something else, “Will we see total cattle numbers declining because we have not put fresh supplies in the system? I absolutely believe that is true”
Click on the LISTEN BAR below to hear more from Rabo's Don Close as he talks with Ron Hays in today's Beef Buzz.
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