Source: NCBA's Cattlemen's Capital Concerns
Cooperatives Working Together (CWT) has announced the implementation of its third herd retirement in 2009, effective Oct. 1, 2009. The timing of this latest dairy retirement, at the height of beef cow culling season, could have a negative impact on cull cow prices this fall, according to the National Cattlemen's Beef Association.
Last week's total cow slaughter was 26% less than the same week in 2008, and year-to-date cow slaughter was down 9%, says Gregg Doud, NCBA chief economist. Usually this would mean a much stronger cull cow market--except lean trim and cull cow prices are down more than 10% from year-ago levels. This is in part due to increased lean-beef imports from Australia earlier this year as a result of a stronger U.S. dollar and softer demand for ground beef. However, the decline in the U.S. dollar against its Australian counterpart suggests fewer beef imports for the balance of 2009.
This sense of optimism, however, is somewhat muted by CWT latest announcement. If this round of the CWT were to involve a cull of 50,000 cows in a 30-day period, it could result in a $3.00/cwt negative impact on cull cow prices, says Doud. Cull cow prices could potentially struggle into 2010, depending upon the exact timing of this cull.
As the economy continues to exhibit sluggish signs of growth, beef demand continues to struggle. The cattle feeding sector alone has seen equity losses of over $7 billion going back to December 2007, he says.
"At the same time, the beef complex overall is under unrelenting duress due to huge pork supplies and pork prices that seem to give wholesale beef prices no ability to gain altitude, despite seasonal improvement in cattle supplies," he says. "In these challenging times, it's more important than ever that all non-market related and policy decisions take into account the seasonal and psychological impacts that they have on the beef and other industries."