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High Prices Push Consumers To Buy Less Beef

  Retailers have begun easing beef prices higher because consumers don't like abrupt price hikes.

Last autumn, $130 cash fed cattle and $200 Choice cutout looked like mere speed bumps on the way to record-high prices.

Since November 2011, the Choice cutout has made four assaults on the $200 level. It punched through in late May, then topped $210. The Choice surge was due in part to Old Man Winter refusing to let loose his icy grip. That created pent-up demand for grilling when weather finally improved.

Unfortunately, the $130 cash fed cattle barrier held. One reason is that by time the wholesale price surge came, cash fed cattle supplies were expected to begin rising seasonally. Forward-looking futures markets, and to a lesser extent cash cattle markets, saw weakness ahead. Current June fed cattle futures are trading $5 to $6 below the bulk of the most recent cash fed cattle trade.

Retailers have begun easing beef prices higher because consumers don't like abrupt price hikes.

Another reason is that analysts and retailers expect consumer pushback against high prices. A key signal will be consumer interest in buying beef after Memorial Day. Grain farmers are familiar with the old market maxim that says the cure for high prices is high prices. High prices give users ample incentive to cut back. They do. Volume of grain moving falls. Prices drift lower. Corn is in what now looks like a typical short-crop, long-tail pattern.

To read the entire article, click here.


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