Beefonomics 101

Speaker sees rise in demand, cattle prices
By KEN ESTEN COOKE Reporter Publisher
When the mass of consumers in New York are snowed in to their homes, you see it in the cattle markets. A drop in pork prices can also have an effect. However, you’ll see major spikes in that market before steak lovers get days off on Memorial Day, July Fourth and Labor Day.

Dr. David Anderson, ag economist, talks about how many different types of factors can affect ranchers in Central Texas. Dr. David Anderson, ag economist, talks about how many different types of factors can affect ranchers in Central Texas. Such is the world of the beef market, or “beefonomics,” if you will, where what’s happening in the global cattle market can affect the way cattle producers in Milam County run their operations.

Livestock Economist Dr. David Anderson gave an update on the global market at Friday’s Central Texas Cow-Calf Clinic, the annual event held at Milano Livestock Exchange.

Area ranchers, escaping the 24-degree cold outside, heard several speakers on cattle, had lunch, then brushed up on pesticide laws and brush control.

A rise in demand “If we see a recovery in the overall economy, seeing sustained economic growth, we will have a rise in demand,” Anderson told the crowd of about 200.

A change in Americans’ spending habits, which may be as temporary as the bad economy, sees a downward trend in costlier meats and a bump up in cheaper staples like hamburger. “People are trying to save money and they’re spending less on everything.”

But Anderson didn’t know if it was a short-term trend or a long-term change in consumer habits.

“It’s unclear how restaurants will fare versus consumers going to the grocery store and cooking their own food. The one thing people still don’t have is time,” he said, citing the convenience factor of eating out.

But even restaurant trends can change, with people opting for hamburger and chicken “value” meals at fast-food places over the $14 steak at a sit-down restaurant.

“Some of the bigger chains have diversified and own more expensive places and cheaper places to eat. That’s helped them absorb some of the loss in their higher-end restaurants,” he said.

Anderson also said slides in the U.S. domestic gross product over five of the past six quarters, have led to declining disposable income, a driver for national spending.

Trends affect locals This can affect local cattlemen (and women) by seeing them thin their inventories. When beef prices fall in any of the trade, wholesale or retail markets, costs for raising that beef cow may not fall as quickly or at all. Two years ago, ranchers saw a huge spike in fuel prices but absorbed it because beef prices were good.

Last year’s drought and some difficulty in finding hay led many to cull some of their herds.

Milano Livestock Exchange coowner Ron Lastovica agreed. He said the water was replenished for ranchers with late rains in ‘09 but they suffered through one of the most serious droughts in history.

“Ranchers still had a chance to buy hay, but you can’t buy water and truck it in,” Lastovica joked.

Lastovica said the ranchers to the south of Milam County suffered the drought’s effects more than area cattlemen.

“It’s probably the lowest supply we’ve seen since the 1950s,” he said. “No one is overstocked. A few liquidated their herds, but most kept their supply where it was.”

Global factors Anderson said things like the declining value of the dollar on the worldwide market also affects the market, as it makes imported beef more expensive. Anderson said cattlemen the world over are cutting their herds, reducing the supply and driving up price.

Anderson showed a graph that showed a huge spike in exports in mid-2008, just before the national economy collapsed amid the banking scandal.

But the export market will improve again, he predicted. “We’ll be shipping more to the four biggest markets for our ex por ts — Mexico, Canada, Japan and South Korea.”

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2010-01-14 digital edition

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