Cattle Market And Controversy
Tri County Beef Cattle Merkting 2016
Jasper, TX
April 21, 2016
David P. Anderson
Professor and Extension Economist
Overview
•
•
•
•
Price Correction
Increasing Beef Supply
Price Relationships
Price of Competition
Prices
Data Source: USDA-AMS, Compiled and Forecasts by LMIC
Livestock Marketing Information Center
$PerCwt.
180
SLAUGHTER STEER PRICES
SouthernPlains,Weekly
170
160
150
140
130
120
110
100
JAN
APR
JUL
Avg.2010-14
Data Source: USDA-AMS
Livestock Marketing Information Center
OCT
2015
2016
C-P-52
04/18/16
$PerCwt.
300
MED. & LRG. #1 STEER CALF PRICES
500-600Pounds,SouthernPlains,Weekly
280
260
240
220
200
180
160
140
120
JAN
APR
JUL
Avg.2010-14
Data Source: USDA-AMS, Compiled & Analysis by LMIC
Livestock Marketing Information Center
OCT
2015
2016
C-P-54
04/18/16
JANUARY 1 COW INVENTORY
U.S.,Annual
Mil.Head
40
35
30
2016 = 30.3 Million Head
+3.5 Percent
25
20
15
2016 = 9.3 Million Head
+0.1 Percent
10
5
1986
1989
1992
1995
1998
2001
Beef
Data Source: USDA-NASS
Livestock Marketing Information Center
2004
Dairy
2007
2010
2013
2016
Data Source: USDA-ERS & USDA-FAS
Livestock Marketing Information Center
Short Term Supplies
Data Source: USDA-NASS
Livestock Marketing Information Center
Data Source: USDA-AMS & USDA-NASS
Livestock Marketing Information Center
CentsPerPound
150
WHOLESALE BONELESS BEEF PRICES
Fresh,50%Lean,Weekly
130
110
90
70
50
30
JAN
APR
JUL
Avg.2010-14
Data Source: USDA-AMS
Livestock Marketing Information Center
OCT
2015
2016
M-P-25
04/18/16
BEEF PRODUCTION
FederallyInspected,Weekly
Mil.Pounds
550
525
500
475
450
425
400
375
350
325
300
JAN
APR
JUL
Avg.2010-14
Data Source: USDA-AMS & USDA-NASS
Livestock Marketing Information Center
OCT
2015
2016
M-S-18
04/18/16
Data Source: USDA-ERS & USDA-FAS
Livestock Marketing Information Center
Data Source: USDA-ERS & USDA-FAS, Compiled & Analysis
by LMIC
Livestock Marketing Information Center
Data Source: USDA/NASS
Livestock Marketing Information Center
$PerCwt.
130
SLAUGHTER COW PRICES
SouthernPlains,85-90%Lean,Weekly
120
110
100
90
80
70
60
50
JAN
APR
JUL
Avg.2010-14
Data Source: USDA-AMS
Livestock Marketing Information Center
2015
OCT
2016
C-P-35
04/18/16
CentsPerPound
320
WHOLESALE BONELESS BEEF PRICES
Fresh,90%Lean,Weekly
300
280
260
240
220
200
180
160
140
JAN
APR
JUL
Avg.2010-14
Data Source: USDA-AMS
Livestock Marketing Information Center
OCT
2015
2016
M-P-24
04/18/16
Short Term Supply
• Sharply Lower Cattle Prices
– More beef than a year ago
– Slaughter and weights
– Increased domestic production
– More imports, less exports
• Packing Capacity
Price Relationships
$PerCwt.
95
FEEDER STEER vs FED STEER PRICES
700-800Lbs.MinusSlaughterSteer,S.Plains,Weekly
85
75
65
55
45
35
25
15
5
JAN
APR
JUL
Avg.2010-14
Data Source: USDA-AMS, Compiled & Analysis by LMIC
Livestock Marketing Information Center
OCT
2015
2016
C-P-53
04/18/16
$PerCwt.
18
CHOICE MINUS SELECT BEEF PRICES
CarcassCutoutValue600-900Lbs.,Weekly
16
14
12
10
8
6
4
2
0
JAN
APR
JUL
Avg.2010-14
Data Source: USDA-AMS, Compiled & Analysis by LMIC
Livestock Marketing Information Center
OCT
2015
2016
C-P-68
04/18/16
Demand
RETAIL BEEF PRICE
AllFresh,Monthly
CentsPerPound
650
600
550
500
450
400
JAN
MAR
MAY
Avg.2010-14
Data Source: Bureau of Labor Statistics & USDA-ERS
Livestock Marketing Information Center
JUL
2015
SEP
NOV
2016
M-P-11
04/15/16
IndexValue
120
100
100
96
91
RETAIL ALL FRESH BEEF DEMAND INDEX
Annual,UsingCPI1990=100
86 86
80
82
85 83
81
80
79
77
75
75
91
88 85 85
80
81
77 75 77 79
86
60
40
20
0
1990
1992
1994
1996
1998
2000
2002
Data Source: Bureau of Labor Statistics, USDA-ERS, Compiled &
Analysis by LMIC
Livestock Marketing Information Center
2004
2006
2008
2010
2012
2014
92
Data Source: USDA-AMS
Livestock Marketing Information Center
Competition
Data Source: Bureau of Labor Statistics & USDA-ERS
Livestock Marketing Information Center
CentsPerPound
180
WHOLESALE CHICKEN BREAST PRICES
Skinless/Boneless, Northeast,Truckload,Weekly
170
160
150
140
130
120
110
100
90
80
JAN
APR
JUL
Avg.2010-14
Data Source: USDA-AMS
Livestock Marketing Information Center
OCT
2015
2016
P-P-02
04/18/16
Mil.Birds
180
BROILER CHICKS PLACED
Weekly
175
170
165
160
155
150
JAN
APR
JUL
Avg.2010-14
Data Source: USDA-NASS
Livestock Marketing Information Center
OCT
2015
2016
P-S-11
04/15/16
Futures Market Controversy
Futures Market Controversy
• Perception That Market is Broken
– Volatility
– Different Prices from ”Fundamental Market”
– HFT
– Speed
• Concern That No Longer an Effective
Risk Management Tool
Futures Market
•
•
•
•
•
Risk Management
Price Information or Discovery
Worth in the Future
Substitute for Current Market
CME is a For-Profit Company
NCBA Letter to CME
• HFT
– Contributes to Volatility
– Many trades, very fast
– Make money on small movements, lost of
volume, many times
• Volatility
– Has it become a liability?
– Inability to get in or out
NCBA Letter to CME
• Latency
– Suggested a one second delay between trades
– Increase chance of execution
• Spoofing
– Submit buy or sell order with intent to
immediately cancel it
– Influence prices
• Audit Trail for Analysis
– Trades, orders, prices, etc
• Monitoring and Regulation
– Self regulating business
Relationship to Thin Markets
• Fewer Sales in Cash Market
– Base for and to settle futures market trades
• Different Issue From Futures Market
Issue, but Related
– Attempt to create an electronic auction for fed
cattle
– Will it work?
– Potential problems?
Data Source: USDA-AMS
Livestock Marketing Information Center
A Little Research
• Yang, Bessler, and Leatham (2001)
– Cash and futures are ”cointegrated”
– Non-storable commodity like beef or pork
• Babula and Miljkovic (2015)
– Pork and futures market prices are close
substitutes
Where to From Here?
•
•
•
•
Not Clear
What Steps Will CME Take?
What Is (Are) the Alternative(s)?
Volatility is Still Here
– CME cut trading hours to the old hours
Thank You!
livestock-marketing.tamu.edu
afpc.tamu.edu
One Big Thing in Livestock Markets
(979) 845-4351
danderson@tamu.edu