Friday, March 8, 2013

Supply and Demand

The major driving force in our local market has been light receipts. In the state of Alabama alone we have sold 34,000 fewer cattle than last year and this trend is the same wherever you go.  With the limited availability of cattle to go to their customers, order buyers have been forced to bid more eagerly. Most sales across the state reported calf prices 2.00 to 3.00 higher.  Its supply and demand at its purest, as the beef industry lets these market dynamics play out with very little government interference for the most part. Fundamentals are lined up in a row for a feeder cattle market surge, including; improved weather, a spring rally in beef cut-out values, a rebounding economy along with an all-time record-high stock market, and last but clearly not least the well-advertised lack of supply.  But when possession becomes more important than the bottom line it can’t last forever.  On the other side of the market, the feedlots and packers are dripping so much red ink it looks like Freddie Krueger has been keeping the books.   I know it may not seem important to us how much money a feedlot or packer is losing, but keep in mind the guys who buy our cattle at the sale have to sell them to someone.  Most of the people they sell them to are somehow tied to a feedlot or packer.  There may be some lag time but if the feedlots are losing money because of high feeder cattle prices it will eventually trickle down.  However with total cow numbers at 1950’s level and no increase in sight, it doesn’t look like the supply is going increase anytime soon. The competition for every calf will remain high.  With the sunshine getting warmer and the drought all but gone in the southeast the demand for cattle suitable for grazing should remain very strong. 

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.