Economist: Beef market is volatile

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Farm Forum

WATERTOWN — Economist Jim Robb says there are a “lot of moving parts” in the current beef market, and that a good corn crop and some drought relief could change things drastically.

Robb is director of the Livestock Marketing Information Center in Denver. The LMIC is a cooperative effort between state university extension specialists in 29 states, federal economists and industry cooperators. He spoke recently at the Northern States Beef Conference in Watertown.

“We’re in a very important year,” Robb says. “We’ve got drought, we’ve got forage issues. We’ve got (good) potential for this next corn crop. The overall U.S. economy will be a driving factor in how high we can take cattle prices over 2013.”

A 3 percent annual increase in the nation’s gross domestic product growth would be positive for the livestock sector, Robb says. If it’s much below 2 percent, consumers will retrench, and so will the beef industry.

“We’re asking consumers to pay record prices for beef already,” Robb says. “We haven’t gotten to the point where the impact of the drought in the last two years — 2011 and 2012 — is even largely reflected in the beef prices because of the multi-year nature of our production system.”

How the economy grows, and what consumers will do in that environment is critical. “Will they continue to buy beef or will they start to switch a little bit to pork and chicken in the domestic economy?”

Deep in the red?

The feedlot side of the cattle market continues to be “deep in the red ink,” Robb says. “It’s a very difficult business. They have sort of financed the cow-calf business in the sense of being willing to take risk and then lose money.”

The packing business struggles, with a recent announcement of another U.S. beef plant shutdown. “It’s hard to pass along these meat costs to the consumer,” Robb says. “That takes the cattle sector really in limbo. We probably have to get feed costs going down to really help heal the U.S. cattle feeding sector, and we have too much capacity.”