MANHATTAN, Kan. – Given recent historic highs in cattle prices, it shouldn’t have been surprising to see values dip somewhat during March, but consumer response to news of lean, finely textured beef in the nation’s meat supply hit cattle and beef values harder than many could have anticipated, according to a Kansas State University agricultural economist.
“I think we were due in early March for a pause. The fact that we’ve had a pullback from historic highs is not really a surprise,” said Glynn Tonsor, livestock marketing specialist with K-State Research and Extension.
He noted that CME April fed cattle futures closed at $118 per hundredweight (cwt) on April 6, down about $12 from a month earlier. Similarly, April feeder cattle futures closed at $148, down from $161 in early March. Cash cattle prices softened similarly, with Kansas fed cattle prices off about $3 at $123 to $124 on April 6.
“But the fed cattle basis is quite strong – stronger than normal,” Tonsor noted, with cash cattle trading $5 to $6 over futures.
Part of the concern right now, he said, is overall demand for beef. Beef exports have been generally flat compared to last year, as has the dollar index.
“I’m still fundamentally bullish on (beef) exports, but when we look at individual weeks, that’s part of the pullback. I’m not going to say we’ve burst the bubble, but we’ve pulled back a bit on that bullishness,” he said.
The economist noted that oil and gas prices and their forecasts have also played a role in consumer demand, but added: “I tend to think that’s a little bit overhyped. Gas still makes up a portion of our individual decision making, but it’s mainly an indirect effect in how it’s embedded in the prices of many things we buy. Add all that up with the LFTB stuff then we have more concern about demand than we did a month ago.”
Consumer reaction to news in recent weeks that lean, finely textured beef is sometimes added to ground beef shocked the trade, Tonsor said.
“Perception is reality. The consumer dollar drives the vast majority of what goes on and people make decisions based on perception. These decisions may or may not be consistent with scientific reality,” he said. “To say ‘it’s beef, stupid’ or ‘it’s always been beef’ may be accurate – and I personally believe that – but I’m not sure it’s sufficient to change perception. You can’t trump perception immediately with science.”