Continuing high demand for beef likely stems from consumers who are using their leftover gasoline money at the grocery counter, says Matt Bennett, Bennett Consulting.
“I think demand is fairly good,” Bennett tells Tyne Morgan on the “AgDay” Agribusiness Update segment. “One thing I always look at that we learned in college is that whenever fuel prices are low, beef demand is usually pretty darn good. That’s exactly what I think is going on.”
Entering the grilling season, cattle and hog producers should be aware of how market conditions can shape price direction, Bennett says. Higher pork prices at retail could increase demand for beef.
“Whenever we’re looking at pork … [and] prices rally and we’re making a little bit more money than normal, the normal thing to do is to expand production just a little bit,” Bennett says. “On farther down the line, I would be a little bit cautious as a pork producer to get too awful bullish in this timeframe. Then as a cattle producer, I need to be cognizant of the fact that the thing we’re competing with the most, really, it’s rallied quite a bit and it’s going to be more expensive on the market going into grilling season. I think we’re going to have pretty strong demand for beef.”
Prices will reflect the cyclical nature of the cattle market.
“With fats, we were telling guys once we got into that $140 area, we were going to be pretty comfortable,” Bennett says. “But the problem is you’ve got a huge inverse in the market. Are we going to get back into the $140s, let alone $130 after seeing cattle back off this week? I do think that’s a definite possibility, but I don’t want to get real stingy with the market because cattle are so cyclical. It’s going to be tough with higher placement and total cattle numbers to get a cyclical cattle trader to want to go to new all-time highs again.”
Meanwhile, heavier cattle weights remain in vogue.
“Placements are still pretty good, and weights haven’t backed off quite as much as what we would like to see,” Bennett explains. “I’m not so sure if feed costs don’t rally a whole lot that guys aren’t going to continue with some pretty heavy weights going into 2016. I do think that there’s still a fair amount of supply available.”