What is in this article?:
- K-State ag economist outlines factors behind record highs
- Many cow-calf producers will likely continue to respond to high prices by selling off cows.
- Exports were strong in 2010 and there is every current indication that will continue throughout this year.
Grain prices and other factors play prominent role in cattle markets
Volatile grain prices are playing a role in cattle producers’ reluctance to expand herds, Tonsor said.
“New crop December corn futures have traded up to $6.20 (per bushel) in recent weeks and with any threat to this summer’s corn crop we could trade at least at those levels or higher,” said Dan O’Brien, K-State extension agricultural economist. “We’re on the razor’s edge in our projected ending stocks for the 2010-2011 marketing year and current projections from USDA are for the tight supply to continue into the next marketing year.”
When conditions are profitable and are projected to stay that way in cattle production, it typically means producers expand their herds, Tonsor said. A current, possibly short-lived oddity about the current situation is that producers have been enticed to sell at the higher-than-usual prices rather than retain cattle for future expansion.
That might lead one to wonder, Tonsor said, if cow-calf producers are strapped for cash or if the average age of producers and possible retirement plans are coming into play. Furthermore Tonsor asks “Is heightened uncertainty at play?
If $50-per-head expected profit used to normally trigger expansion, what does it take today?”
He outlined a host of other issues producers should watch beyond today's immediate supply and demand situation, including animal welfare issues: “Social pressures are here to stay. Oprah’s recent show talked more about animal welfare than food safety and cattle are not immune.”
He referred to a recent segment on the Oprah Winfrey Show that dealt with animal welfare issues.
Tonsor cited recent studies suggesting that meat expenditures reallocate to non-meat purchases in response to increasing media attention to the topic of animal welfare.
Other areas to be mindful of include the comparative state of national animal identity and traceability programs with other global meat exporters and associated implications on current and future trade negotiations.
“South Korea as of December, 2010, ruled that all imported meat be traceable,” he said, adding that Canada has put into place a national program that facilitates age verification.