heads up on beef prices

here is my amateur view of the price of beef, and by extension most all food prices, just because corn and soybean oil, corn sugar are so commonly used in all processed food products.

a lot of the existing beef cattle crop (calves) are going to come to come off the cow light, because of the drought. the ranchers in beef country have short hay crops, and will not only not be able to put that lost weight on at the ranch, they will also be dipping pretty deep, into an already historically small cow herd, and culling animals that normally would be kept in the herd.

those cows will probably go right into the meat chain, as mostly burger. you already know how prices have risen, this might put enough on the market that there would be a TEMPORARY dip in prices. if you have a freezer, and eat an amount of beef, it would be the time to stock up.

after it does rain, between smaller numbers of calves being born, more of them being kept to rebuild the herd, and this years calves coming out of the feedlots light, because of the lack of and the price of feed corn, the supply of beef will be severely low. i think the competing proteins will also be pretty high.

there is a misconception that all the corn that a feedlot animal eats takes away from the human food supply, and that is certainly not the case. this year, probably more so, with droughted out ears of corn, more of the crop will be damaged and drop into the animal feed category, but total corn available will be light for all purposes.

we always have a hamburger animal around, unmarketable because of lameness or some other flaw, so we will have burger, but we are going to stock up any other of the lesser cuts if we get the opportunity, as well as bring home some case lot of vegetables, soups, beans, etc.

but there is no inflation, the tv tells me so!

 

Plenty of articles already spelling the gloom & doom of prices for later this year and next.

http://www.spokesman.com/stories/2012/jul/26/drought-to-push-up-prices-for-meat-dairy-eggs-in/

http://www.nytimes.com/2012/07/26/business/food-prices-to-rise-in-wake-of-severe-drought.html

http://economywatch.nbcnews.com/_news/2012/07/25/12953075-usda-says-drought-will-push-up-food-prices-in-2013?lite

And yet, a local grocery store has a sale this week on porterhouse for $3.99#. I'm stocking up the freezer. Might be the last time I can afford to buy beef.

 

don't go overboard stocking up

like anything that passes for "reporting" in this country the media is a day late and a dollar short (which is why so many are going broke)

feeder cattle prices are already down over $20 dollars on the commodities market from their all time high of $160 from the middle of February to March

and while $140 is still high that is what the price ran (or above) from mid June of last year to May of this year where they dropped to $120 and then have crept back up to the $145 level currently

also while corn and other crop prices and the drought can drive the price of cattle historically for a number of reasons cattle have sold at a "loss" to the producer and while many producers are not OK with this many are in a way "ok" with that......they might shrink the herd to cut the losses, but they will still produce cows

more than anything what is driving prices right now is exports especially prime cuts and that means that grinding meat is actually available and plentiful for the most part because the packing houses are going to slaughter for prime cuts for export and have to do something with that burger...and while exports were driving overall prices for cattle higher and leaving grinding meat cheaper and available overall exports are down lately and that means that grinding meat will probably hold steady and prime cuts for the US consumer may even drop in price slightly

also hide and offal prices are steady to slightly higher which is a profit center for many slaughter houses at these prices so that helps keep the meat prices in line as well

also cattle feeders are better than ever now with using feeds that do not include much if any corn.....wheat is still priced relatively low and is a great cattle feed, cotton seed, cotton seed meal, and gin trash are dropping in price as well as cotton production picks up from the drought that hit most of Texas last year with near zero meaningful production of cotton

lastly while hay and grass production has been impacted because of last years drought across Texas and because of acres getting plowed up for row crops in the mid west at the same time hay and baled grasses have always been "wasted" for lack of a better term and hay farmers have not been as "motivated" to produce at the max per acre for various reasons and now with the price up and demand up hay farmers that are left are making investments in fertilizer, being more efficient with baling and storage and markets are opening up to get hay from areas of abundance to areas of demand and fuel prices are down which is a huge driver of cost for moving hay even for short distances....many farmers are now baling corn stover, wheat straw, barley straw ect that they would normally leave on the ground, burn off (in some areas) or plow under or worst of all bale and then let rot in the fence row......now it actually gets baled, transported, and actually sold and fed

the real damage was done at this time last year that is when younger cows were being pulled forward for slaughter and others were being culled out for ever and it was really because of the price paid as much or more than the fear of feed cost and also the Texas and NM drought that drove ranchers to just liquidate because it is so difficult to transfer an entire herd (though some did)

so there are multiple factors for beef production especially that play into the retail price and corn and soypea prices are only a very small portion of that overall picture and many of the factors that were going to drive up prices have already played out and stabilized through mush if the last half of last year

also while milk prices are on the decline recently they are still at a "decent" price and they are coming down (rapidly) from a very high price and dairies play int beef production two ways.....dairy momma cows need to be pregnant to lactate which means calves being born and when prices drop less productive cows go to slaughter for grinding meat mostly and for lesser grade prime cuts

so there should have been a lot of breeding going on recently to take advantage of the price move up and now there should be some culling going on as the price drops which keeps cows available for the slaughter house

even if a dairy was looking to breed up their own herd they would still have some cows they cross bred with a beef sire because they did not like the mommas genetics and production, but they wanted her pregnant to lactate to take advantage of milk prices being up

so at the end of the day the "damage" for beef has been done mostly last year and early this year and things are stabilizing and there are reasons that grinding beef should stay stable and that prime cuts should be stead to even down a bit in price

poultry and hogs might be a different story though, but I don't follow those as closely and both of those can be ramped up and down much faster for numerous reasons VS cattle......poultry especially relies on corn and soypeas for rations though so that is an issue

Smithfield the large pork producer is even importing some Brazilian corn as we speak so they are taking steps to address their cost issues and pork prices are on long term contracts as are poultry so there is huge ups and downs in producing at a profit and then at a loss and you have to ride that out

 

Having 2nd thoughts now because I reread the ad and see it is "select" grade porterhouse for $3.99. Probably not worth the drive to pick some up. About 60 miles round trip and I don't think I've ever purchased "select" before, usually prime or choice.

 

someone is very correct in pointing out that beef from dairy cows, the export market, the use of nontraditional feed byproducts, etc. are all factors in prices. i hope he is correct, a stable market will be better for everyone, including consumers, than what i am thinking i see.

the wall street journal had an article today, predicting about 4 percent increase in beef prices each of 2012 and 2013. i hope they are right, and that the increase is limited to that.

 

Best stock up folks cause it is going to be going up. The branch manager at works family is in the cattle business and has been for many years and we were talking about this back in late May as his family was seeing an increase in feed costs already. Making matter even worse is that grass fed due to the drought across much of the cattle producing region is non existent and when you can find it the price is very hefty. Our wheat harvest here was pretty decent but much of the wheat belt has been hard hit by storms or drought or in some cases both, making grain go up and everything associated with it, even the feed I use for my dog training birds has already increased some and its about as low of a quality grain product you can find outside deer corn. Wheat, corn, soybeans all have been hit hard.

 

Seems like alot of thinking has been done on the subject.

here is what i think.

The people who sell those products realize they can charge more and make more profit so thats what they are doing.

No matter how many farmers there are, the crops all basically will workl their way into the big distributors who will control the prices.

Same with cattle and other livestock.

Its not like farmers are selling directly to the comsumers on enormous scale.

Just like gas prices.

They realized they can double the price and people will still pay it without much complaining so thats what they did.

notice how the prices never went back down even though supply has increased?

Also notice how we are now conditioned to paying over $3 per gallon for gas.

Its the new normal. You think stuff costs alot now, wait until next year.

 

So that's your view, huh. Did you share with the AP?

Nick

 

Just more wonderful news

People with families who are struggling to put food on the table can look foreward to tougher times.

 

I kind of take all the talk of gloom and doom with a grain of salt. I agree with Someone. Obviously, all foodstuff, like most other things is affected by supply and demand but for years in the spring, I have watched the news and see citrus growers lighting their smudge pots and ice all over the fruit, followed by the newspersons gloomy prediction that the price of oranges and juice with go up substantially due to a loss of crops to frost. In reality it helps fill the air on a slow news day but there is so much surplus that gets bulldozed annually that the price does not change drastically. Often when it does, it is manipulated just like gas.

When the price of a barrel of oil goes up, the next day, prices are adjusted at the pumps.....responding to the rising cost of crude. Then when the price of a barrel goes down, the price at the pump stays up while the company explains it takes 6 months for the price to work its way through the system. If you shop for most anything (except gas and petroleum products) whether it is a pair of jeans, a DVD, a new car or food, from store to store there will be a difference up to a buck on a grocery item for instance but if you had 50 gas stations in your city there probably is no more than 3 or 4 cents difference between the cheapest and the most expensive price. Free Enterprise? price fixing and manipulation. Gloom and doom is to prepare the masses.

Jimbo338

 

First off Dairy cattle make a very small section of the beef on the market, most dairy cattle when they are retired are only suitable for cutter and canner market. Next the so called non trad food sources are pretty much a non point, you cannot fatten up a herd of cattle with them, I grew up raising Angus, Limo, Brangus and Brahma a rancher relies on a grass and hay crop no matter what.
Lastly this is the last step in a proccess that started months ago with a shortage of cattle coming from sources such as Brazil and Argentina, due to grazing conditions there. 5 Months ago we received a notice from our leather products vendors we would see an increase in those products due to a shortage from those out of country ranchers. Our leather costs went up 15% and so did the leather for clothing, furniture and other products.
If folks choose to ignore and hope for the best so be it, myself I bought a heifer last night for the butcher shop in two weeks after some fattening on alfalfa and sweet feed.

 

I don't raise cattle but I do raise a lot of poultry for resale. I have Chickens, Turkeys, Geese, Ducks and Guinea. I also raise some pigs, goats and horses. Some would call it a hobby farm since here in California we feed dry lot and we seldom make any profit. We buy everything the animals eat. Feed has been going up every year. A 50 pound bag of chicken feed use to cost me $6.99. Now it cost me $13.99 and turkey feed cost 18.99. I use to own 33 horses ten years ago. Hay prices when from $7.00 a bale to $16.99. I now only have 7 horses do to the cost. We are either told the drought caused it or the farmers can't get the bales out of the field do to the rain. You can't win. I just know the price will never go down.

This was the first year that I cut back on the numbers of birds that I raise. Now I am wondering if I should wait to sell some of the birds. I don't want to sell them if everyone will be dumping their birds do to high cost of feed. Even if it cost more to raise, maybe I will make more if I hold on to them awhile.

 

cattle will fatten nicely on cotton seed, cotton seed meal, wheat, beat pulp and many other things and the fattening of cattle is for the end years of their life just before they go to slaughter....many feed yards and large feeders can afford to lock in corn prices long before the price spikes so they are not subjected to the highs unless they made a big mistake in their forward contracting

also while many dairy cows are only fit for canning/cutter dairies serve a purpose to help grow herds when their dairy cows are bread to beef when the dairyman is not looking for a replacement and they just need a momma cow to lactate....also if the dairyman is not using sexed semen they will still be throwing a large number of bull calves and those can be raised properly for a higher quality beef than just canner or cutter

and bi-products and co-products are still important to the rancher with pasture that did not get rain or that he has run heavy trying to catch up or take advantage of prices....the fattening will take place at the feed yard

poultry rations even today have a large % of corn and soy where beef rations are moving away from that or they can use DDGs where poultry are the worst for utilizing DDGs they need the whole kernel

the longer you hold them past full growth the more you have to feed them and that can cut into profits more than anything

poultry with their prolific egg production rates are much easier to catch a flock up VS cattle that have a single cow usually and sometimes twins (though not often)

so if you can make money on the ones you have make the money and buy in more eggs or have more eggs and go right back at it...holding them past growth stage is just feeding for nothing unless you know the price will improve

plus home raised birds should be commanding a premium over standard chickens and should be less susceptible to the large scale market ups and downs

also commodity prices do go up because of ups and downs on use and production, but they also go up because of the amount of currency that is in circulation (inflation)

 

let me try one more time, though i probably am going to wish i hadn't.

first of all, i am impressed, really, with everybody's different analysis of the situation, based on their worldview and individual situation. i thought it interesting, too, nick, that after i wrote that post yesterday morning, that the wsj, our usatodaywannabe local paper, and Fox news and nbc all had features. the drought certainly is not new news, but i was not trying to piggyback on the news of the day with my own thought on a small segment of the total situation.

as someone pointed out, the liquidation of the beef cow herd from texas and new mexico has already happened. however, there will be a liquidation from montana, the dakotas, nebraska, kansas and some other pretty big cattle producing states. it is starting already, and nobody knows exactly to the degree that it will occur. these cows mostly do not get fed up more in a feedlot, they go to slaughter...so there may be a temporary glut of ground beef on the market this fall, which i guess i did not state clearly enough in my first post. if you eat a significant amount of ground beef, it may be an opportunity to stock up on that product. or not.

after these cows are gone from an already historically low u.s. cow herd, it will first take moisture, then cow herd rebuilding, before the supply they produced comes back to what it was, so a lower supply, ECON 101 alumni, means what, assuming static demand?

here at the ranch, my heifer calves, born in feb/march of 2012, will either be sold to feedlots or kept to turn into cows, decision in october 2012. if kept, bred may 2013, to calve feb/march 2014, with the offspring from those heifers ready to send to a feedlot october 2014, and to slaughter about june 2015. so, at best, any extra cows sold this fall will not have their production replaced for two years. so, my guess is that overall beef prices, based on supply, less any mitigating factors like dairy beef, other protein prices and replacement feed products, will go up. or not.

like i said, i always have a hamburger quality animal around anyway, so i am just going to stock up on some canned goods, because i do agree with some of the other posters, the people who can control pricing are going to use this to jack up what they can.

 

Kitson not knowing what state your in how bad is the drought hitting you on weight gain in your area? We were lucky in Oklahoma we had a good wet and mild spring which helped with the calving survival but the grass is running short and hay is already on an upswing, thats just from what I buy for my TWH so I cant say on large bales. Most ranchers and hobby folks even are seeing around 7-10% below normal gain in the calves at this age compared to the average. With last years drought and now this insult to injury theres been a lot of activity at the OKC Stockyards of mainly heavier and short term feeders.

 

bubba, water is becoming the issue in much of montana. personally should be ok, but know others who are worried or already hauling water or moving cattle early.

we normally have better weights on dry, rather than washy grass, but water quality and quantity will be the limiting factor on the calf weights, along with if shipping has to happen early.

hay, though, for winter is the bigger issue. in twenty years at this place, i have never bought hay. last years crop was 1700 tons, this years crop about 120 tons. a catastrophic policy on the forage will pay for about half of the 400 tons we are bringing in from near the canadian border where there is a pocket that has good crops. freight about 55-60 a ton, and buying wheat hay, barley hay, crp hay, and a 100 ton of second cutting that will be about 160 a ton in. so we are using alternative feed products, and will keep most of the herd together, but will cull deeper than usual and be sending cows that would normally be bred to market. got on the hay issue early, i suspect those that wait or had to talk to a banker or wait for crop insurance might decide to cull more, saw alfalfa advertised in billings today for 200 plus freight. no way that works, especially if fall forage is already dried up.

thanks for asking.

 

Not just beef, but Bacon. I can do without beef, but threaten my BACON? I am stocking up!

http://lifeinc.today.com/_news/2012/09/25/14095135-bacon-shortage-worldwide-unavoidable-uk-pig-group-says?lite&ocid=msnhp

 

I live on a feedlot here in Nebraska, I never have to worry about buying beef...but I am sure with the drought, and the lack of hay, and some farmers with no irrigation for the corn, that they will feel it...and the cattle price and beef price will reflect it. We raise enough corn here to supply over 5000 head of feeder cattle, Hay has been in short supply for quite awhile now, I dont think its going to effect the quantity of meat much at all...It will probably effect the rating of meat and possibly put "prime" in a short supply,for a while and that just gives the distributers a reason to jack up the price of what they do get. Pork does the same thing.

 

Just bought a boneless pork loin at Sam's Club, $1.99/lb. yesterday. I whacked it up into pork chops for the grill, a pork roast (mit Kraut, granny smith apples, caraway seeds), and Kabobs (marinate with teriyaki sauce, skewer onions, green peppers, mushrooms, fresh pineapple). Ribs were $2.99/lb. If my dad were alive, he would laugh his a** off that ribs were more expensive than boneless.

 

The problem with some of the feed last year and even more this year is it contains nitrates. Also the grass was so poor most fed some supplemental protein all summer.

Oh for non cow people, nitrates will kill cattle that eat feed too high in nitrates.