What is in this article?:
- Cattle prices move past seasonal highs
- Troubling signs on the horizon
• It is the strength of demand that has been the driver of higher cattle prices, not supply.
• So far in 2011, beef production has been 1 percent higher as a result of both a few more head and higher weights.
• Exports have been an important demand stimulant.
Cattle prices have had a remarkable run to the upside with finished steers reaching the low $120s per hundredweight in early April.
Now there are signs those lofty prices will not be maintained into the spring and summer, said Chris Hurt, a Purdue University Extension economist.
"It is the strength of demand that has been the driver of higher cattle prices, not supply. So far in 2011, beef production has been 1 percent higher as a result of both a few more head and higher weights. Exports have been an important demand stimulant," he said.
Since September 2010, the industry has exported a larger volume of beef than it has imported — a rare historical event. As an example, in the calendar year 2009, the industry imported more than they exported, with net imports accounting for 3 percent of domestic production. Imports greater than exports increases the domestic supply and lowers prices.
"Since last September, exports have exceeded imports by an average of nearly 3 percent of domestic production. This means more beef is flowing out of the country than into the country, so consumers have to pay higher prices for more limited supplies. Although total beef production is up about 1 percent this year, the amount available for U.S. consumers is actually down about 2 percent because of the impacts of trade," he said.
Domestic demand has been strong as well, but consumers are expected to become more reluctant buyers of beef as the spring and summer progresses. The continued slow recovery in the general economy has helped a few more people get back to work, and rising stock market prices have increased the net worth of some households, making them feel a bit more comfortable.