Bruce Cobb: Insight on current cattle market trends
January 21, 2011
Market signals are hard to interpret, but Bruce Cobb, manager of Consolidated Beef Producers (CBP), offered cattle producers his insights on current market trends. CBP is a non-profit agricultural marketing association that develops marketing programs for fed cattle that utilize negotiated, value-based pricing. According to CBP’s Web site, http://www.consolidatedbeef.com, “The goal is to obtain optimum value for members’ cattle while helping cattle feeders consolidate to remain independent.”
So, Cobb comes with plenty of experience in cattle markets, and he shared his two cents on the markets of the day.
“When we look at the factors impacting the long-term status of the markets, a big thing we look at is volatility,” said Cobb. “You have to stay on your toes because the market changes so quickly. Whatever is going on in the market place could change in the next 10 minutes because of something that has happened in China or somewhere around the world.”
Global factors are important to watch in the market place, he said.
“When we look at our global supply, that’s got to be one of the biggest drivers in our markets in the last couple of months,” explained Cobb. “Exports were a big story in 2010, and that shouldn’t change in 2011. This is because of global supplies, the value of the dollar and U.S. beef competitiveness around the world. Russia started to play a role in our markets last year. Japan, Korea, Taiwan and Mexico are all wanting our beef. We expect that to continue in the future and for these export opportunities to become a very big part of profitability in our industry – particularly the packing sector.”
The packer has long been painted an enemy among ranchers, so an instant reaction might be, why should ranchers care if the packer is profitable? Cobb explained why it’s so important for the packing sector to be successful.
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“Packer profitability needs to be watched very closely,” said Cobb. “They have experienced some very good years recently, and it’s very important that they continue to do that. If they don’t, plants will close, which will change slaughter schedules, which will ultimately hurt our beef supply.”
Cobb said competition from other protein sources, as well as rising prices for consumers in the meat case, are impacting markets.
“There is a lot of competition coming from poultry and pork,” explained Cobb. “Beef was very competitive last year relative to pork. Starting this year, we are looking to be pretty competitive and hopefully that can continue. We are also getting into price zones that we have never before witnessed. Retailers have anxiety about moving these prices into the consumer sector. They are closely watching how the consumers are responding to these prices.”
Of course, rising corn prices will continue to play a role in cattle markets. Escalating input costs have caused many producers to cash in on their cowherds.
“The increase in cow slaughter numbers continues,” noted Cobb. “Every week at CBP, we venture to look at that cow slaughter rate, and it never quits moving up. That’s really important when we look at grind and trim supplies. Ground beef is what we consume the most of in the U.S.”
Overall, Cobb predicted that 2011 won’t deviate too dramatically from 2010.
“The bottom line is, demand shows there is promise, supplies are adequate, and opportunity appears to be good,” concluded Cobb. “I don’t want to be overly optimistic because, like I said, something could change and make my comments irrelevant in the next 10 minutes.”
Summarizing his thoughts, Cobb said nothing is more important than healthy competition in the market place.
“Our big thing is we look at what cattle competition looks like from week to week,” said Cobb. “That means having more than one meaningful buyer for our product. A good week means there are three or four meaningful buyers. Sale barn owners get really nervous when they see customers leaving. They get nervous because they need folks to bring cattle to them, and they need producers to buy them. This is a price-driven business; global consumers or buyers realize that.”
Corn prices, export markets, economic recovery, competition from other protein sources, cow slaughter rates and packer profitability are all factors that have an impact on market trends. Cobb hopes his interpretations can help producers filter through those trends and make important buying and selling decisions down the road.