Demand’s Mixed Signals

Wes Ishmael

April 15, 2012

2 Min Read
Demand’s Mixed Signals

 “Cattle and beef markets have dropped significantly in the last month led by sharp declines in boxed beef prices and Live and Feeder Futures,” said Derrell Peel, Oklahoma State University Extension livestock marketing specialist, in his market comments last week. “Cash fed cattle prices have traded erratically lower from highs of $130/cwt. in early March to $122/cwt. last week. Feeder cattle markets have also dropped from recent peaks but, not surprisingly, have seen the least impact; least of all in the lightweight calves and stockers.”

With supportive supply fundamentals, the lion’s share of wonderment revolves around demand.

Beef exports continue to shine. Though volume so far this year is a bit below last year’s record pace (3% lower), the value of exports is 10% higher, according to the U.S. Meat Export Federation (USMEF) Friday.

February beef exports equated to 12% of production when including both muscle cuts and variety meat, and 9% for muscle cuts only. That compares to 12.9% and 10%, respectively, in February 2011. Export value equated to $208.05/head of fed slaughter, up 14% from last year’s $182.12.

Among the gainers, according to USMEF, January-February exports to Russia were up 58% in volume (9,297 mt.) and tripled in value to $38.2 million.

Egypt led gains in the Middle East, with exports to the region increasing 13% in volume (23,507 mt.) and 19% in value ($53.3 million).

“Export growth in these markets is reflective of a very successful effort to expand the global footprint of U.S. beef,” says Phil Seng, USMEF president and CEO. “At one time, these markets were only a small factor in our global results, and buyers were exclusively interested in variety meat. But the U.S. industry has made great strides in marketing beef muscle cuts, many of which are underutilized domestically.”

It’s domestic demand that continues to send mixed signals.

“Primal rib and loin prices, though down in recent weeks, are still above year-ago levels. However, Choice boxed beef has dropped below year-ago levels in the past two weeks,” Peel explained. “Certainly, the continuing controversy regarding lean finely textured beef is adding to the turbulence and the current weakness. Decreased value of 50% trimmings has decreased carcass values about $40/head, making already negative packer margins that much worse. There is also considerable scrambling in processed meat markets to adjust product flows in both beef and pork markets as a result. Higher gas prices may be one of the biggest factors affecting beef demand currently.”

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