Fed cattle prices touched $1 a pound the first week in April, signaling strength in all facets of the cattle market as well as improving consumer demand, according to a Texas AgriLIfe Extension Service livestock and food products economist.
“In mid-February, prices were in the low-to-mid 80s, but now our supply situation has set us back up to a $1 and it appears it may be sustained for a little while,” said David Anderson, AgriLife Extension economist. “As of Tuesday (April 8), we’re seeing a lot of movement on the demand side. Part of what we’re seeing is a seasonal increase in prices, but stronger. It’s lasting longer than normal.”
Fed cattle prices at $1 per pound or $100 per hundredweight “has been a relatively rare event," Anderson noted in his weekly cattle market comment report.
Anderson said there’s indication that consumer demand is picking up due to the activity in the wholesale market.
“We’re seeing consumers increasing purchases of middle cuts of beef, so we’re seeing a trading up of purchasing,” he said. “I think that’s an indication that consumers may be starting to feel somewhat more comfortable when it comes to grocery purchases, and so far that seems to be sustaining from what we’re seeing with the wholesale market activity.”
On the supply side, cattle producers have been reducing cow herds as a result of sharp input increases and the Texas drought, Anderson said.
“Texas especially cut cow numbers due to the drought,” Anderson said. “What we can expect is to see some producers think about restocking herds as there is more talk about a rally in the calf market.”
Texas cattle auctions have seen an upswing in prices recently. Anderson said 500-pound to 600-pound steer prices have been as high as $1.20 per pound.
“Higher calf prices encourage people to reinvest in their operations,” he said. “However, we continue to cull cows at a fast clip. Why? There’s been so much demand on the consumer side for ground beef purchases that the cull cow market has been very attractive.”
The biggest risk in the current market is the future of calf prices and prices paid for corn, Anderson said. If ample rains hit the corn-growing regions of the U.S., supplies will be ample to fulfill both livestock and ethanol demands.
“We need good timely rains to produce a good crop,” he said. “For several years now we’ve had good growing conditions. Another thing is we need the economy to continue to recover to keep beef demand going up.“