There was nothing but great news today for the long term beef supply picture. USDA recognized the fact 2010 beef supplies will make another sharp decline on top of the 2009 numbers. We reported on the 830 AM Livestock Fundamentals page USDA took 423 million lbs off their 2009 beef production estimate and 810 million lbs off their 2010 beef production estimate. These are huge declines to make in one month. Let's put this long term supply picture under the microscope. Recently, feedlot style kills of steers and heifers have been running 5% smaller than last year. Last week's cash cattle price was 19% lower than the same week last year. 5% lower supply and yet price is 19% lower. Demand is depressing cattle prices anywhere from 20% to 30% right now! Point #1: supplies are set to drop even more next year. On that issue alone we should see 2010 contracts run about a $5 premium to 2009 levels. Point #2: We will not suggest beef demand (the economy) will suddenly roar back to 2008 levels. However, IF the economy can stabilize and possibly recover in the coming months we will see a sharp increase in 2010 prices.
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