Strong demand is the primary driver in the recent run-up in cattle prices, explains Naomi Blohm of Stewart-Peterson.
“The packers were caught short. So we saw the cash market just go to the moon,” Blohm tells “AgDay” host Clinton Griffiths on the Agribusiness Update segment for Thursday, May 18, 2017. “The animals that were coming in were of course lighter weight because the producers were saying hey, I’ll take this higher price and let’s bring that cattle right in. The quality of the cuts that were coming weren’t as fantastic as normal, so there’s a little bit of a shortage of some of those more premium cuts.”
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Seasonal factors such as the onset of the summer grilling season and economic factors also are playing a role.
“Gas prices of course are lower. We’re heading into Memorial [Day] weekend demand,” Blohm says. “I think a lot of those big retailers got their orders in ahead of time, so that way they could have their product in the stores in the coming weeks.”
Cattle production should remain high throughout the year and into 2018 based on projections, Blohm says. “Any setback in the cattle market, I think, is going to just give us the marketplace’s supportive price where it has to stop and look back and make sure that demand is still there,” she explains. “If it is, I think we see prices stay supported.”
Similarly, international demand for U.S. hogs has pushed export volume to roughly 23% of total production, Blohm says.
“The June and July contracts got up to the $80 level on charts, and that’s a big resistance area. We don’t have any fundamental reason to go higher than that because supplies are good enough. So we’ll see a setback, but again the setback is going to be something where the market goes into a sideways trading pattern.”