Dr. Darrell Peel Examines Recent Volatility In Beef And Cattle Markets

Mondays, Dr. Derrell Peel, Oklahoma State University Extension Livestock Marketing Specialist, offers his economic analysis of the beef cattle industry. This analysis is a part of the weekly series known as the "Cow Calf Corner" published electronically by Dr. Peel and Dr. Glenn Selk. Today, Dr. Peel examines recent factors contributing to current volatility in the beef markets.

 

"A wide variety of internal and external factors are impacting beef and cattle price levels and volatility. Beef production is at a seasonal peak in June with weekly beef production since late May estimated to be nearly 7 percent above year ago levels. Fed cattle prices have dropped and could be near an early seasonal low with feedlots ahead of schedule for summer marketings. Year over year cattle slaughter is up while cattle carcass weights are lower compared to last year, moderating beef production increases somewhat. With Independence Day meat already booked, wholesale beef values have dropped sharply the past ten days to support sales of seasonally large beef supplies. If the three-day July 4 weekend results in strong retail beef movement, beef markets may maintain good momentum through the summer doldrums between July 4 and Labor Day meat sales in August. The latest retail beef prices indicate that beef prices are declining quite slowly; in fact, the all fresh beef price for May was up slightly from April. Overall indications are that beef demand is holding strong in the face of growing beef supplies. Beef movement this spring has been good; indicated in part by the drawdown of large beef cold storage supplies to levels six percent below year earlier levels in the latest report. 

 

"The June Cattle on Feed report was very close to expectations and should not provoke much market reaction.   The report did confirm strong marketings that suggest that feedlots continue to be very current, as evidenced by declining carcass weights. The report also confirmed continued year over year increases in feedlot placements meaning that feedlot production will be cyclically higher late in the year. The increased placements were all in the heavy weight categories and will be marketed out of feedlots in the fourth quarter of the year. June 1 feedlot inventories were 102 percent of year ago levels. Despite larger feedlot inventories and big feedlot placements, feedlots are in significantly better shape now compared to this time last year and well positioned to handle the challenges of increased feedlot production in the coming months as long as marketings continue at a good pace.