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There are no quick fixes to bring down beef prices because rebuilding the national cattle herd is a slow, multiyear process that requires ranchers to hold back heifers for breeding, which tightens beef supplies further in the near term, Oklahoma State University agribusiness professor and well-known extension livestock marketing specialist Derrell Peel wrote in a guest column published in Tuesday’s New York Times. Instead, softer consumer demand (see item below) and a pivot toward cheaper alternative proteins will play a key role in easing price pressures over time, he said.
Peel warns, however, that federal intervention and political posturing around the issue of beef prices will only get in the way of the process. “The administration has resorted to placing blame on the big meatpackers and retailers. Those accusations and investigations, too, will likely come up empty,” he wrote. “Multiple academic research and government investigations of the beef industry over the last 50 years have consistently failed to uncover significant anti-competitive behavior.” Government “grandstanding” has only contributed to uncertainty and volatility, he said, increasing risk for U.S. cattle producers and delaying the industry’s recovery.
“We can’t grow cows any faster. We can’t make the weather better. And we are only just starting the process of rebuilding the herd, which requires holding some heifers back for breeding — a process that will make tight supplies even tighter,” Peel said. “For the rest of the decade, then, expect inventories to remain constrained and prices to remain high.”
Market recap: Grain futures perked up overnight but quickly succumbed to fresh selling in the regular session, demonstrating the path of least resistance remains to the downside as favorable weather allows combines to roll and harvest pressure to weigh on corn and soybeans.
- December corn ended 5 cents lower at $4.62, hitting a nine-week low.
- November soybeans lost 5 ¼ cents, settling at $12.48 ¼, hitting a seven-week low.
- December soybean meal dropped $6.10 to end at $348.70, while December soybean oil eked out a gain of 4 points at 66.73 cents.
- December soft red winter wheat dropped 12 cents to $6.43 ¼, scoring a nine-week low.
- December hard red winter wheat declined 8 ½ cents to $6.91, setting a three-month low.
- December spring wheat shed 7 ¾ cents, ending at $6.62 ¼.
- December cotton rose 75 points to 80.88 cents.
- December live cattle gained $2.15 to end at $230.175, hitting a three-month high. November feeders rose $2.375 to $346.30, setting a three-month high.
- December lean hog futures gained $0.80 to end at $67.15, finding short covering support after holding above last week’s contract low.
Bolsonaro and Brazil’s farm lobby… Brazil’s powerful farm lobby is expected to gain even more influence if challenger Flavio Bolsonaro defeats President Luiz Inacio Lula da Silva in Sunday’s presidential election runoff, Bloomberg reported. Polls show the race has tightened to a statistical tie, but Bolsonaro has remained the betting favorite. The report noted that he has promised to let the Frete Parlamentar da Agropecuária, known as the farm caucus and made up of lawmakers dedicated to the industry, to choose his agriculture minister. That would give the group a bigger say in government decisions, with farmers seeking to counter rural debt with subsidized credit and bring down double-digit interest rates they say are stifling business, the report said. It noted that environmental law is also on the agenda, with industry-backed lawmakers largely in favor of loosening regulations in a country that’s the world’s top supplier of products including soybeans, sugar, coffee and beef.
Oil futures whipsawed… Crude-oil futures saw volatile trade, with December WTI futures pushing back above $100 a barrel for the first time in over a month before turning south to end lower after taking out the bottom of the previous session’s range. “This is the kind of volatility you get when geopolitical events pile up on top of each other,” Robert Yawger, commodity specialist at Mizuho Securities, told Dow Jones Newswires, saying there was no “smoking-gun” catalyst for the move as traders monitor crude flows out of the Strait of Hormuz and rumors around potential peace talks and the potential for escalation. Pro Farmer consultant Jim Wyckoff says Tuesday’s technical price action in December WTI marked a classic case of “buyer’s exhaustion,” with a low range close after a push to new highs, and likely points to a near-term top.
Zelensky attends Oslo peace talks… Some pressure on oil, wheat and corn may also have been tied to talks in Oslo toward how to end Russia’s war in Ukraine, which were joined by Ukrainian President Volodymyr Zelensky, U.S. envoy Steve Witkoff, representatives from France, Germany, the U.K., Poland, the European Union and Nato and co-hosted by Finnish President Alexander Stubb and Norwegian Prime Minister Jonas Gahr Store. No breakthroughs were announced, however, and skepticism over any potential deal remains highly warranted. The Financial Times reported that, in a news conference, Stubb said progress had been made on sticking points surrounding Ukraine’s security and the economy, and that those proposals would be taken by Witkoff to St. Petersburg, where he’s set to meet with Russian President Vladimir Putin on Wednesday. Relations between U.S. President Donald Trump and Zelensky are increasingly strained, with Trump on Tuesday pressing Ukraine, which was invaded by Russia in February 2022, to “settle this war.”
- Trump blames Zelensky for soaring diesel prices and has pressed Ukraine to halt attacks on Russian refineries. Ukraine briefly paused attacks last week after Trump said Kyiv and Moscow had agreed to a truce on attacks on energy facilities, but resumed after continued attacks on Ukraine facilities by Russia. The FT said Zelensky on Tuesday reiterated a willingness to halt strikes on Russia’s refineries if Moscow agrees to halt attacks on Ukraine’s energy infrastructure.
K-shaped spending… Tracking data from Morning Consult shows the spending divide between high- and lower income households continues to widen, with high earners pulling away. The business intelligence and decision firm said Tuesday morning that households earning $100,000 or more now spend 2.8 times as much each month as households earning under $50,000 – the widest gap in Morning Consult’s tracking. Households earning $200,000 or more increased their spending 15% over the past year after inflation, the analysis showed, while households under $50,000 cut back.
- Pro Farmer’s take: For livestock markets, the consumption split illustrates a two-tiered demand picture, with sustained high-end food service and demand for premium cuts offset by softening volume among price-sensitive consumers.
Brazil dodges nationwide China ban on poultry imports… Brazil’s government said on Tuesday that China’s restrictions on poultry imports will be limited to products from Santa Caterina, following an outbreak of Newcastle disease on a farm in the state, Reuters reported. The decision eases fears of broader trade disruptions, the report said. Meanwhile, Chile imposed statewide restrictions, while Mexico suspended poultry imports from the entire country.
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