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Weather, quality demand, all play into late 2018 prices

Progressive Cattleman Editor David Cooper Published on 25 June 2018

From pet food, to fast food, to ads in the weekly newspaper, a common trend in the retail world is encouraging bigger and better beef.

Jim Robb, director of the Livestock Marketing Information Center, told those at the Texoma Cattleman Conference in Ardmore, Oklahoma, on June 15, that consumers are opening wallets at the appeal of beef, more than other proteins in the current market.

As he displayed a Denver grocer advertisement from November 2017, Robb pointed out how ribeye and roast promotions were bigger than the Thanksgiving bird.

Jim Robb

“When was the last time before the week of Thanksgiving beef was shown with a bigger ad than the ad for turkey?” he asked.

Robb noted how fast food chains are selling larger burgers, and pet stores and grocers now market frozen pet food with beef products. All of it utilizes the current supply and quality of beef.

“They’re trying to use beef to attract this very busy customer, and they’re using beef as the driving campaign.”

For producers around the country, that requires a dedication to quality grades in their beef and the genetics that enable them.

“Most of you in cow-calf country pretty much think all this money you’re putting into genetics and bulls, somebody else is collecting,” Robb said. “I’m going to challenge you to say the demand profile we’ve had the last two years has come directly back to calf prices, because cattle feeders aren’t making any more money, packers aren’t making more, retailers are making less. The net came back mostly to calf prices, because of these genetics.”

Per capita beef consumption has been going up since 2014, Robb reported, and the beef demand index, which has held at high levels for that same period, likewise reflects how consumers are willing to pay more for beef.

“That tells me the demand profile is as good as it’s been in this range, since the early ’90s.”

Total red meat production, plus poultry, was at a record amount for 2017 but may slow down in coming years. The question, Robb asks, is how much protein can the industry expect a consumer to eat above the current 219 pounds annually.

“We’ve not asked consumers to eat this amount of red meat and poultry since 2007,” he said. “That’s the headwind we’re facing.”

Robb’s price forecasts showed some slowing from the strong returns shown in 2017, but a healthy pattern is taking shape for this year. Feeder steer prices at 7 to 8 weights were up earlier in the year but trailed off. Cow slaughter could also pick up in 2018 if the drought worsens, and if dairy prices also decline, those dairy cows could be slaughtered and counter the beef market.

The May Cattle on Feed report showed numbers high in early 2018, but it’s coming down, Robb said. “The system is in the midst of adjusting as we speak.”

If producers want a market gauge, they should watch the corn supply. “I’m going to look every week or two to see if the corn crop is getting bigger or getting smaller. If this corn crop is getting bigger, this calf market can beat these prices.”

Robb called this a business person’s cattle cycle, with momentum helping those who make the transitional decisions early on when to keep heifers. The current forecast was showing larger supplies for early 2019, meaning slowing prices and higher protein supplies.

“Now we’re swimming upstream, but the current has slowed down against us dramatically.”

Robb said producers face higher per cow production costs than years ago, but the tools enabling higher quality keep the market hungry for more beef. The premiums seen in today’s market will pay producers for their genetics, feed and other inputs, when they use the right management.

“The beef industry is not about feeding the world. The U.S. beef industry is about feeding growing incomes around the world and the U.S. And we have to play this quality game to do that. Anything that reduces the cost of quality puts us in the pork and chicken game.”  end mark

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PHOTO: Jim Robb of the Livestock Marketing Information Center. Photo by David Cooper.