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Bearish Supply Forces And Delayed Demand

Oct 05, 2016

By Dr. Glynn Tonsor,
Extension Livestock Market Economist


Over the last couple weeks, the cattle markets have seen an acceleration in the down turn of prices across the board. Both live and feeder cattle futures under pressure at this time, says Extension Livestock Market Economist Dr. Glynn Tonsor, as prices have actually dropped below a dollar a pound. Farm Director Ron Hays went to Dr. Tonsor to find out what activity he has observed in the markets as of late that is contributing to such low prices recently.



“The nearby October live cattle contracts actually broke the 100 mark, just below $99 - that’s down almost $8 for the week. We were around limit down on Friday,” Tonsor said. “Similarly, the October feeder cattle contract which is about $123 for the week, down about $9 and likewise limits on Friday. So lots of bearish components this week.”

Tonsor says the undertone of growing supplies continues to weigh on the industry. He says supplies outside of the beef side, is as much to blame as the beef supply itself. However, Tonsor does acknowledge a few positive demand signals in the market; the announcement that China will accept US beef for instance.

“But those are being dwarfed by the certain supply story,” Tonsor said. “Those demand signals tend to be a little bit more down the horizon, not immediate. So bearish supply forces and neutral, if not delayed demand forces, continue to put downward pressure on this market.”