Uncertainty rattling cattle markets

by Talk Business & Politics staff ([email protected]) 564 views 

Tariff threats and weather have fueled uncertainty throughout the cattle markets in recent weeks. While the latest threat of additional tariffs on Mexico has been removed, they did rattle many markets last week, according to Derrell S. Peel, extension livestock marketing specialist with Oklahoma State University.

Peel said cattle and beef markets have decreased from April highs with uncertainty in a variety of factors weighing on markets the past month. He added ongoing uncertainty about trade and the politics of trade continue to take a toll on agricultural and other markets.

Peel said a wet spring provided good moisture for forage growth in general but ongoing flooding and excessively wet conditions is limiting grazing and hay production in some regions. He added sloppy feedlot conditions also hinder production in some areas. Meanwhile, the record late planting of corn and soybeans this year is adding some uncertainty about yields and pushing corn prices higher.

“There is little doubt that the corn crop will be smaller than anticipated just a few weeks ago but carryover levels are still expected to be adequate. While significantly higher feed prices are not anticipated at this time, the uncertainty remains,” Peel noted.

He said the biggest threat of all is likely weaker demand for beef in the back half of 2019.

“Strong beef demand supported cattle and beef markets in 2017 and 2018 but there are signs that some weakness may be developing in beef demand in both domestic and international markets. While unemployment remains very low, other indications of weakness in the macro-economy are concerning and have led to reduced forecasts for U.S. economic growth in 2019; largely due to ongoing impacts of tariffs and trade disruptions,” Peel said.

He expects higher consumer prices for gasoline and consumer items coupled with large surpluses of beef, pork and poultry will likely stifle any prospects for pricing power among protein companies. Peel said there was an early seasonal peak to boxed beef prices in recent weeks the wholesale cutout values have weakened.

Peel said the wildcard could be African Swine Fever which could provide some boost to protein markets in the coming months.

“The uncertainty plaguing cattle and beef markets probably should not change most producers’ strategic plans for this year but it will be important to watch the multitude of volatile factors that may continue to or further impact markets.  Short run volatility may impact the timing and other tactical considerations for production and marketing and highlights the value of flexibility and the ability to be nimble in these uncertain times,” Peel said.