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More Ads are Good

Written by Dennis Sun

Spring is here, we hope, and we are all wondering what lamb, calf, yearling steer and heifer prices are going to be this summer and fall. Then, the hard part for some of us is guessing what part of the summer and fall would be the best time to sell. What is the best method to use to make that decision? Do we read up all we can on the issue, do what we have always done, flip a coin or shake the dice? Remember, making the decision isn’t hard. It’s living with the decision that’s hard.

Looking over a crop and livestock forecast by the Food and Agriculture Policy Research Institute (FAPRI) at the University of Missouri – and reported by CattleFax – gave some interesting facts.

The report projected declines in corn and wheat acres this spring, but it still sees higher corn and wheat planted acres than what was forecast by the U.S. Department of Agriculture (USDA). FAPRI also projected slightly stronger prices for both corn and wheat than what USDA has also projected. As far as net farm income for 2017, the report said that the small jump in grain prices is going to be offset by lower livestock prices projected. That’s not good news.

Livestock prices have held up for the first quarter of the year. In cattle news, bull sales have been strong for the most part, if that is any indication, but there have been a number of forecasts for lower prices, even though beef exports have been strong. 

I always like to watch on Wednesdays and see what the local grocery stores are advertising, as far as what meat is on sale. If it’s beef, I’m always curious what cuts they are pushing. After all, that is the demand or what they have a lot of and need to sell that week.

Each week, USDA releases the featuring activity for the grocery stores. The latest report through CattleFax said that beef featuring in February averaged 5.5 ads per store. This was up from February 2016, with 5.2 ads per store. It was also the largest number of ads in February since 2012 for featuring beef. But the primal weighted beef-featuring was $5.58, down 53 cents from the same time a year ago.

Pork featuring was at 3.3 ads per store, and that was two percent below a year ago. Then, the bad news for beef producers, chicken featuring was at 1.9 ads per store, two percent above a year ago.

Some good news was that in February, 52 percent of total meat featuring was beef ads, compared to 51 percent in 2016. The trend of featuring beef over pork and chicken was strong in 2016, and this has continued into this year.

The report said that the ratio between the composite cutout and the USDA all-fresh retail beef price can give an indication of the margin that retailers have. A smaller ratio indicates a stronger retail margins. The report also said that retailers are finding value in using these meat products to entice customers into their stores, resulting in increased competition among grocery stores or retail outlets.

CattleFax said featuring beef at a higher rate compared to other proteins is a positive for the beef market, but everyday retail prices will need to decrease to motivate retail demand that sustains longer than the shorter-term price.

That price decrease, plus a strong beef check-off, will help get beef prices where we want them.