WASHINGTON—Fed cattle prices, like the other futures markets, have dropped drastically due to all the unknowns surrounding the coronavirus, outbreaks in production areas and a free-falling stock market.
But at least part of the cattle price drop points to classic supply and demand economics rather than panic. According to the USDA, the start of beef price decline actually started five weeks ago.
“In fact, we’ve been in a very sharp decline since the first of February,” said USDA Livestock Analyst Shayle Shagam. “Last week the average five-year steer price which is our average benchmark was $109-per hundredweight that's down from $127 year ago.
Fed cattle are close to those numbers, that's cattle being sold by feedlots for slaughter. Feeder cattle are those that have been grazing and then sold to feedlots.
Fed cattle prices were $112.80 per hundredweight during the first week of March compared to $127.98 per hundredweight at the same time last year, according to USDA reports.
All in all, that's more than a 14-percent drop. Shagam says they’ve seen a sharp drop in cattle futures as well and it's hard to know how many factors and which is the culprit but Shagam says there is at least one clear factor.
“There’s just a lot of meat out there,” he said.
Live cattle futures prices fell enough to halt trading on March 9, according to Ag economists. But prices rebounded March 10 above what was lost, and trading was halted because prices hit the price ceiling for the day.
Some economists think it’s an overreaction many thinking futures were too high in January. So some of this activity isn’t a big surprise. The key, economists say is that markets always overreact whether it’s up or down.
This past weekend many shoppers at Walmart and Costcos saw empty meat counters and other supermarkets selling out of product, but Shagam says there is the hope of a turn around:
“Stores have been selling out and buying large amounts of meat to stock the shelves and that appears to be price supportive in the short term,” he said.
Will prices start climbing with all the hoarding?
“We’ll see,” said Shagam.