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Marketing Expert

published: October 31st 2008
source: Purdue University

A Purdue University marketing specialist said while the cattle market has followed the downturn in the world economy of late, some recovery in prices can be expected in the coming months.

    Chris Hurt said markets often anticipate the worst, in this case a depression, and if the worst does not occur, there is some recovery. Though he believes the odds favor a recession and not a depression, Hurt said the cattle industry has been caught in the web of uncertainty in the financial markets.

    “The cattle industry is no exception, as both domestic and foreign demand for beef is related to consumer incomes,” said Hurt. “As a consequence, beef supply fundamentals seem less important to prices, at least for now.”

    Hurt said the corresponding decline in feed prices has helped reduce the costs of finishing cattle and kept the decline in calf prices more moderate. His calculations show feed prices have fallen by a much larger percentage than cattle futures. Beef demand and cattle prices are directly impacted by consumer income, according to Hurt. The current financial crisis has reduced income and, therefore, the demand for beef and cattle.

    “The magnitude of the decline in incomes will influence the magnitude of the decline in cattle prices,” he said. “This recession may be more severe, more like the recessions of 1974 and 1975 and again in 1981 and 1982 when real Gross Domestic Product dropped near three percent.”

    Hurt said recovery in the fed cattle market to the low- to mid-$90s would seem the most likely possibility in the coming months. He sees a $5 to $7 per hundredweight improvement in feeder and calf prices.