In this week’s Trending Headlines, BEEF Senior Editor Burt Rutherford takes a look at where cattle prices will go from here. According to economists at the Daily Livestock Report, marketplace volatility shows that there is little consensus among market participants at this point on what cattle prices will do for the rest of the year.
Really, it’s anyone’s guess what the market will do, and if I had the answers, I would certainly be a millionaire. However, it sure doesn’t hurt to speculate. In my October column for BEEF, I shared my somewhat optimistic views on the cattle market. Remember that just because we aren’t at the phenomenal levels from 2014 doesn’t take away from the fact that these are still some of the highest prices we’ve ever seen on record.
A recent BEEF poll showed that 57% of readers are in the optimistic camp as well, predicting the fall calf run as a great one. Meanwhile, 43% of respondents said prices have been too good for too long and cattle prices will continue to weaken.
You can read my column, “Fall market optimism” on page 62 of the online edition of the October issue.
To understand where prices are going, it’s important to know where they’ve been. Tim Petry, North Dakota State University Extension livestock economist, recently wrote a review of the cattle cycle, which appeared in Ohio State University’s Beef Cattle Letter. In his article, Petry shared the three components of the cattle cycle, including:
1. Cattle inventory cycle
Petry writes, “Cattle inventory cycles experience periods of increasing numbers called accumulation phases and periods of decreasing numbers called liquidation phases.”
2. Beef production cycle
Petry explains, “Beef production cycles lag inventory cycles by about one year because to liquidate numbers, more cattle must be harvested. To accumulate numbers, fewer cattle are harvested.”
3. Cattle price cycle
Perry adds, “Price cycles are typified by periods of increasing prices called increasing phases and decreasing prices called decreasing phases. Cattle price cycles tend to be the opposite of beef production cycles. The two factors that most affect the length of cattle cycles are the reproductive biology of cattle and weather.”
Despite the typical 10-year cycle, Petry says there are a number of factors that changed the cycle in the last 15 years, including a severe drought, unforeseen beef demand shocks following the terrorist attacks on Sept. 11, 2001, a case of bovine spongiform encephalopathy (BSE) in December 2003 (and subsequent cases), a terrible recession resulting in a financial crisis (the worst since the 1930s) in 2008-09, federal government policies such as the Energy Policy Act of 2005, competing livestock diseases such as H1N1 and avian influenza, volatile corn prices thanks to the ethanol boom, and global market issues.
Petry writes, “For many years, cattle producers experienced a somewhat predictable cattle cycle approximately 10 years in length. However, during the last 15 years, an abnormal number of outside events have caused the cycle to be less predictable and left producers wondering if the cattle cycle is relevant for planning purposes. The likely answer to that is yes, with particular emphasis on the next several years.”
Where do you think cattle prices are going? What is going to be the next thing to occur to cause a big shake-up in the beef industry? Are you bearish or bullish on the cattle market? Share your thoughts and predictions in the comments section below.
The opinions of Amanda Radke are not necessarily those of beefmagazine.com or Penton Agriculture.
You might also like: