Where's the Beef?

Published on: 11:19AM Dec 04, 2008
The chart of the week is weekly beef output.  As depicted in the chart below, beef production during the last month or so has been trending appreciably below year ago and 2006 levels. Why is this occurring? Well, principally for two reasons. Earlier this fall beef packers margins were being challenged by deflated beef markets and inflated cattle prices. In an attempt to pressure cattle prices lower and/or influence beef prices higher, beef packers slowed beef output. The slowing and expanding of beef output by packers has been a relatively common practice during the last few years and the way that beef prices are currently moving downward suggests that beef packers could limit beef output soon. The second reason that beef production has been trending below year ago levels is the restricted supply of market ready cattle. Cattle are typically placed in feedlots for roughly 150 days before coming to market. And placements into feedlots during the last 6 months or so have been appreciably below prior year levels as cow/calf producers have kept their cows on pasture longer, partly due to the rise in feed prices. The near slaughter ready cattle supply for the last few months has been below year ago levels and models suggest that the trend will persist into the winter. Eventually all of this could be bullish for beef prices but of course beef demand will have to cooperate. And that could occur intermittently like it did last month which may intensify beef market volatility at times this winter.

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