HonestChieffan |
08-06-2012 07:00 AM |
Beef economics and the prices at retail are rather complex. Calves are born on grass not in feedlots and calf production is dispersed across the country. Under normal conditions those calves are kept on the farm on grass till weaning (350-400#). If the producer has grass he will evaluate prices for that weight compared to futures on 500-700 pounders and may hold them till heavier weights. They sell them to what are called backgrounders. Backgrounders are not cow/calf. They run cattle on grass till reaching weight to go into a feedlot.
What is happening now is the weaned calves are getting sold at depressed prices compared to last spring because the grass stocks are virtually nil in the main drought areas. Also, pasture cattle are dependent on water. Water is in the form of ponds...they are drying up. So what we call lightweight cattle are moving into the feedlots.
Lightweights require more corn and hay and mineral in the feedlot since they come in light. As this flows, the feedlots will begin to kill lighter weight fat cattle. When they start killing lighter cattle the supply of finished meat in the supermarket will go down. Prices at that point will rise.
Compare timelines on chicken and pork to beef and you can see why those meats react faster to cost of production changes. Chicken from egg to table is a matter of weeks, Hogs from birth to breakfast is months. Beef is over a year.
Total cows(breeding females) is down and will drop further causing more inflationary pressure on meat. Some say we could see $10 corn. That will be a huge factor on beef but even more on chicken and hogs. Example of this is its always been a rule of thumb that to feed a pig from 40 pounds to butcher weight of 220 it will require roughly 10 bushels of corn and whatever is needed in soybean meal and mineral. a corn move from $5 to $10, and beans moving from $12 to $20 will roughly double the cost to raise a pig. Producers can influence their selling price rapidly by breeding fewer sows.
Drought plays a major role on decisions here forward. We will run out of hay if we dont get fall rains to get grass growing. That is impacting us now when you see producers sell cows. Grain prices and range conditions will hit backgrounders and feedlots hard.
Consumers have an opportunity now to buy low cost beef in supermarkets because we ar killing a lot of cattle to make room for the light cattle coming in and we have a temporary glut of meat(beef)
Dunno if this helps but there it is...AgEcon 101 sorta
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