Is beef regaining its 'leading indicator' status?
May 24, 2013
From The Editor
May 24, 2013
Hello Pro Farmer Members!
Our quick Memorial Day message on the front of this week's newsletter is heartfelt. It's a sincere thank you for the sacrifice made by the families of our fallen Military and anybody that has served this country. And your Pro Farmer staff is sending prayers to the people in Moore, Oklahoma, as they recover from this week's tornado.
We had several "keeper" items in this week's Pro Farmer, but I want to talk further about a couple.
Our feature page was on the current confusing state of the cattle and beef markets. Record-high boxed beef values and contract lows in live cattle futures just don't make sense. We discuss the disconnect in depth, and then jump to what it might mean for the farm and general economies.
Record high beef prices with consumers still buying beef means they've accepted another price increase for beef. It used to be that beef prices and demand were a leading indicator of conditions in the general economy. If consumers were buying beef, and especially high-valued whole-muscle cuts (steak), it was generally a sign the economy was doing okay. OR - that the economy was stagnant, but prices for food, fuel and other items would climb. (In other words, inflation.)
With that in mind, the beef market's confusing "code" it is sending right now could be a little troubling. Consumers are accepting inflated beef prices compared to the raw commodity. If this trend extends into other sectors, it would mean weight on raw commodity prices and higher consumer prices... the start of general economic inflation.
The second "keeper" item in the letter this week was the update on Sea Surface Temps in the eastern Pacific Ocean along the equator. There are no "official" forecasts that La Nina will return this summer, but Iowa State University extension climatologist Elwynn Taylor is never one to wait for an "official" forecast before making one of his own. He sees La Nina returning by mid-June, which would likely be followed by a hotter- and drier-than-normal July and August in the Midwest.
Elwynn is comparing 2013 to the 1947 growing season. I haven't read enough about it or studied that season enough to know if he's wrong or right, but I trust Elwynn enough to take him at his word.
The year in my memory bank that would be a good comparison is 1995. That was the corn crop that launched the summer-1996 corn market rally to then-all-time highs. I'm not predicting new all-time highs, but I am saying we've got a lot to learn about the corn supply over the next four months... and corn demand over the next 18 months.
That's it for now...
I can't begin to tell you all how proud I am of my son Thomas. He graduates high school this weekend and is making plans to make a living (somehow, someway) in the outdoors/shooting industries. He's had quite a ride through life already and his next step into business school and a life supported by the stuff he enjoys so much will be unbelievably exciting! Congratulations T!
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