Economic Storm Casts Shadow on Cattle Markets

US - As the consumer's pocketbook goes, so goes the beef industry. Now as the economy continues to trend southward, does that mean the cattle markets will follow suit?
calendar icon 23 October 2008
clock icon 1 minute read

The short answer is yes, says Jeff Caldwell, Agriculture Online Multimedia Editor. The long answer, however, shows the direction of the economy in general is a greater concern to the cattle markets than traditional market fundamentals, says Purdue University Extension economist Chris Hurt.

"Where the U.S. and world economies go is expected to plot the direction for cattle prices. As a consequence, beef supply fundamentals seem less important to prices, at least for now," Hurt told Agriculture Online.

Who in the beef sector has taken the most heat from the economy's slide? Hurt says it's those producers who "did not have finished cattle forward sold, especially those who had purchased high-priced calves and high-priced feed this past summer." But, that's not all.

"The most likely group in this category is small farmer feedlots as many large commercial feedlots have a greater tendency to have cattle forward sold," Hurt adds. "The negative financial impacts on cow-calf producers has been somewhat less in recent weeks as November feeder cattle futures fell only seven percent."

A continued economic slowdown will likely cause a drop in cattle prices driven directly by a slowdown in consumer beef demand. How much? It all depends on how long the economic downturn lasts, and just how far the equity markets slide.

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