I thought finished cattle prices were going to have a very bullish year with prices well into the $130s by now.

Live cattle futures started the year with the same enthusiasm, but have deflated since. What went wrong?

The mystery can be unraveled by looking at supply and demand.

On the supply side, the expectation at the start of 2013 was for a three percent decline in beef production during the first-half of the year. To date, beef supplies have been down closer to one percent. More beef often means lower prices.

There seem to be three demand components contributing to the weaker than expected cattle prices.

First, the U.S. economy may have been weaker so far this year than anticipated. Second, reduced pork and chicken exports have meant that more of those products have been adding to domestic meat supplies. Third, retail beef prices rose to record high levels while retail prices of competitive animal proteins were not rising as much, or even falling.

Beef exports now look somewhat weaker than last year. The culprit seems to be the strength of the U.S. dollar. The dollar has risen about four percent so far this year. 

Even more dramatic has been the 12 percent drop in the value of the Japanese yen relative to the dollar. Japan is an important buyer of U.S. beef.

Pork exports have dropped off sharply this year, being down fourteen percent in the first two months of the year and chicken exports were down three percent. Lower exports means there is more pork and chicken that remains in the domestic market to compete with beef.

The weak U.S. economy has many consumers shopping for value and competitive animal proteins have had lower prices relative to beef over the past six months.

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Retail choice beef prices have been at record high levels this year reaching $5.30 per retail pound in March. Retail beef prices have risen relative to retail pork prices by about six percent over the past six months.

Beef prices have risen about 10 percent relative to turkey, four percent relative to chicken, and seven percent relative to eggs.