It’s a pretty safe bet that cattle producers will wave goodbye to 2017 with sadness. But they won’t be sorry to see it go because they got beat up in the cattle market. Quite the contrary.
Usually, says Jim Robb with the Livestock Marketing Information Center, when cyclically larger cattle supplies are the dominant factor in the cattle complex, the fourth quarter almost always posts the lowest prices of the year.
Almost always. And that’s why we’ll be sorry to see 2017 slip into the annals of history.
Speaking during the recent Range Beef Cow Symposium in Cheyenne, Wy., Robb stepped through the drivers that made 2017 such an unusual year for cattle markets. “What we essentially have, for the first time since 2003 and the first time ever through the whole year, is the market pulled animals through the production system,” he said.
Carcass weights have been below year-ago levels for most of the year as feedyards sold cattle as quickly as possible into a generally strong market. That helped. But the main driver, Robb contends, has been retailers.
He showed a picture of a supermarket newspaper ad from 10 years ago that touted steaks at $5.99 per pound. Then he held up a supermarket newspaper ad in the Denver market from the week before Thanksgiving this year—New York bone-in steaks at $4.99 per pound. “And right next to that ad, smaller on the page, spend $100 and get a free turkey. How many years has it been since beef was on the front page and beef was on top of turkey at turkey time? It’s been a long time.”
That, he says, reflects a significant change in how consumers shop and how traditional grocery stores must compete in order to survive. Internet shopping is on the rise and will only continue to gain market share over traditional retailers.
“How do you compete with that as a traditional grocery store? What do you have to offer? You have the fresh meat case, you have fruits and vegetables and you’ve got milk and yogurt. And that’s all you’ve got,” Robb says.
Brussel sprouts as an incentive to get people into the store? Not hardly.
Indeed, beef featuring has long been a staple in the retailers’ war chest when they want to get people into the store. And in the past, cattle producers have grumbled at the low price retailers peddled their product for.
Grumble no more. The amount of beef that grocery stores moved this year by using it as a loss leader is the number one factor in this year’s market, Robb contends. In fact, he estimates that it has added at least $13 per cwt to fed steer prices.
And it will continue. “This is a sea change,” he says. “The market for consumers has never been like this. Are they [retailers] going to keep doing this? If they want people in their stores, they’re going to do it.”
Second on the demand side that has made 2017 a surprisingly good year has been exports, Robb says. “Number three has been domestic demand holding together.”
Looking ahead at the market, Robb predicts we’ll see lower prices the next two years, but says they may not drop back to what we saw in 2016. And it’s possible the fourth quarter of 2019 could be a repeat of the fourth quarter this year.
“We have a lot to get through the next two years and we expect lower prices the next two years. But as we get out to 2019, 20, 21, you can probably have some stronger cattle markets,” he predicts.
But for now, enjoy the ride. “The U.S. economy is growing. Consumer sentiment is as good as it’s been since 2003 and 2004. Unemployment in this country is as low as it’s been in years. Consumer incomes are up in this country. This is an economic environment where overall, this has been supportive of the beef market.”