Published on January 25, 2014
Q1- low supply to test demand December 05, 2013
November notables • Record cash cattle prices paid last month - $134 live and $212 dressed • Record box values ($200.33 comprehensive), record ribs too • USDA formula box sales reached record 54%, branded tied record 15% • USDA drop credit reached record $15.06/cwt live or $208/head • USDA steer weights: tied record 876# • Fall cow run did happen, but tied with 1971 for second smallest in history back to 1950 • Counterseasonal bump in quality grade 2
Summary • 2013 was the end of the herd liquidation. 2014 will be a rebuilding year. (Unless another drought!) • Feedlot inventory -600k head on Dec 1 (-6%), will impact Q1 steer + heifer slaughter • Data says economy is growing – but is consumer still deleveraging? 1.9% Q3 consumer spending growth slowest in 4 years. • Beef exports OK. 3-4% more chicken coming. Pork supply? • Expect to move cutout consistently >$200 psychological level 3
Supply key points • Feedlot inventory -600k head on Dec 1 (-6%), will impact Q1 steer + heifer slaughter. • Q1 fed slaughter projected 459k average, that’s 36 hours. • Q4 placements largest quarter since mid 2011, impacts Q2 supply- good news!! • Cows – lower feed costs, grass, higher milk prices and a young herd keep both beef and dairy culling at a minimum. I’m using -10% for 2014. November was -12%. 4
Unable to close the gap even with big Q4 placements 5
459k Q1? Seems so low to be far fetched but supported by low CoF 6
LC futures would have to go even higher to solve Q1 supply shortage, borrow from Q2 7
Cow slaughter telling us liquidation is over 8
90% lean: imports support domestic? 9
>$200 coming? 10
Drop value: record levels helping packer margin 11
Demand questions • Economic growth question – just what is the data reflecting? • Middle man margins? Does the consumer pay what we are paying for cattle? • Export growth continues – but at what rate? • Competing meats – more chicken, less pork (PEDv)? On balance my guess is largely netural to beef 12
Choice minus Select: Heading lower into Feb/Mar 13
It’s been a good run: Ribeyes 14
Recap • Function of the market is to ration a declining supply – raises price risk • Low Q1 beef production – – – – -8.5% vs. Q4 -5% YOY 5.894B# Lowest in 34 quarters (since Q1 2005) Combination of lower fed and cow slaughter • Expect cattle Q1 prices $129 - $136; boxed beef prices >$200 some weeks • Seasonally soft demand Jan/Feb but low production supports prices 15
What does all this mean to our customers? • Retail – Declining supply – Choice / Select spread narrows into March – Tight ground beef supply • Foodservice – Carcass weights lower through April – Quality grade lower into spring • Manufacturing / beef processing – Lean beef supply – heightened risk – Import supply still tight – Freezer stocks declining • Distribution – Lower middles – Tight supplies 16
The Takeaway Assured supply is more important than price. 17
Start studying Economics Chapter 4 : Law of Demand & ... Q2-Q1----- x 100 Q1 ... the price of gasoline might be low for a while & the demand is high .
Graphical representation of supply and demand. Although it is normal to regard the quantity and the quantity supplied as functions of the price of the ...
Why are some high and others low? ... Supply curve. P2. P1. P3 Demand curve. Q1 Quantity. ... To test yourself, try shifting a demand curve.
Law of Supply and Demand. Browse. ... will be Q1 and the ... The supply of superstar basketball players is very low, while the supply of competent ...
Test & Measurement ...
... Case Studies Using Demand and Supply Analysis ... *Test Your Understanding*. In ... the price elasticity of demand is low c. the income elasticity of ...
Chapter 3 — Demand and Supply 1) ... decrease the demand for turnips if turnips have a very low price. ... Q1. B) this market is in ...
What is demand? Demand is the desire for a commodity supported by the ability and willingness to pay for it. ( Desire to buy ( Ability to pay ( Willingness ...
Q1 Demand and Supply of Xamoff [25pts] Consider the (hypothetical) market. Find Study Resources. Main Menu; by School; ... Test Prep. UPLOADED BY econwiz50 ...
This paper studies the demand for and supply of residential housing in urban China ... Q1 and 2010:Q3. Ren ... 2011, “Residential Housing in Urban China ...