How cattle prices and beef demand interact

Ranching is a complex system of interrelated events. The cattle and beef market is no different.

 

By Derrell S. Peel, BEEF Magazine

May 08, 2019

 

Peel is Oklahoma State University (OSU) Extension livestock marketing specialist

 

It is common in academic and industry discussions to refer to beef demand in the aggregate, often in the context of competing proteins, primarily pork and poultry. In reality, final beef markets consist of an immense array of companies and activities at the wholesale and further processing levels that link consumers with beef markets.

 

There are complicated and intricate dynamics of time and space in these multi-sector vertical market relationships, all of which contribute to making the cattle and beef industry a very complex set of markets.

 

The complexity increases when one realizes that beef demand is not a single market but is the net effect of the disassembly of beef carcasses into many products entering different, but often related markets.

 

The total carcass value that drives beef and cattle markets is the net effect of several hundred products that result from slaughter and fabrication and ultimately become thousands of different products that are part of retail grocery; hotel, restaurant and institutional (HRI) markets and exports, along with markets for edible offals and other by-products of cattle slaughter.

 

Cattle prices are derived from the total value that consumers place on beef products. Final consumer demand for beef determines beef carcass values and sequentially fed cattle prices; feeder cattle prices; and calf prices.

 

Supply works in the opposite direction as cow-calf producers act on the derived demand signals incorporated in calf prices to produce a supply of calves and which leads sequentially to feeder cattle supplies; feedlot production, cattle slaughter and total beef production.

 

Recent research at Oklahoma State University highlights this diverse set of markets and the challenges of understanding beef demand when it is disaggregated into the myriad of individual beef product markets. The research drew heavily on interviews across the multitude of beef market sectors including packers; wholesale food distribution companies; further processors; retail grocery companies; restaurant companies and beef export specialists.

 

In total some 30 interviews were conducted across the country with companies representing a cross-section of the beef product industry including multiple firms at all beef market levels. These interviews provide a representative view of national and regional packing companies; further processing firms, including steak cutters providing portion control products as well as other processed product providers along with grinding companies providing hamburger for fast food restaurants; national and regional food distribution companies; and beef exports; as well as representatives of the 40,000 retail grocery stores and the 600,000 restaurants in the country. 

 

Numerous issues and trends were identified in the research, which highlight the dynamic and evolving nature of beef markets. Important beef market factors include:

 

more, including links 

https://www.beefmagazine.com/prices/how-cattle-prices-and-beef-demand-interact