Cinch up that seatbelt. This cattle market madness is only going to get more dramatic.
You may think you’ve been on a rollercoaster ride, but Derrell Peel, Oklahoma State University (OSU) ag economist, shared data at a recent field day that could wow the most seasoned thrill seeker.
"We have record level prices pretty much anywhere you look in this industry and they’re going to get higher," Peel said, addressing nearly 75 stocker operators earlier this month.
The "Backgrounding for Quality" seminar at White Brothers Cattle Co., near Chickasha, Okla., was co-sponsored by OSU, Pfizer Animal Health and Certified Angus Beef LLC (CAB).
Peel said being a market analyst used to be much easier. "Beef demand wasn’t changing much, international trade wasn’t all that important and corn was always $2 a bushel, so all you had to do was figure out the cattle inventory and you had a pretty good bet on what was going to happen in cattle markets."
"What’s driving prices today is not something that’s happened overnight," he said. The industry has liquidated cattle 14 of the last 16 years. In January, USDA numbers showed fewer than 91 million head of U.S. cattle, the lowest inventory since 1952.
That makes supply a key driver, not just in 2012, but for the next four to six years, he said.
Replacement heifer retention has increased since 2009. "But it hasn’t translated into net growth in the herd because we’ve had very large cow slaughter," he said.
Drought drove that last year and still remains a wild card moving forward.
Perhaps surprisingly, these lower animal numbers have not shown up in the form of significantly smaller beef production, until now.
"You’re eating your way into smaller inventories," Peel said, noting that liquidation means more harvested animals. "That supports production in the short run, but at some point you simply can’t maintain that. We have reached that point."