All ag markets are volatile and will remain that way, according to National Cattlemen’s Beef Association Chief Economist Gregg Doud, until the U.S. corn crop gets out of the ground. Doud, at the NCBA annual meeting in Denver says the current political turmoil in the Middle East serves as a reminder of the need for more grain and livestock production:
“If you look at what’s going on in Tunisia and Egypt right now, that’s really about food prices. This is the discussion about being able to feed people in a sustainable manner and having a reliable and consistent and reliable source of food. These markets are signaling to US agriculture that we’ve got to crank up the volume a little bit. If you’ve looked at deferred futures contracts, that’s exactly what it’s telling you. And so as long as the value of the dollar stays where it is, global demand in china, etc. is where it is, this could be a real golden era for us, here in agriculture.”
The cow herd is at a 50-year low, yet Doud says cows are still going to the slaughter plant, heifers are going to the feedlot instead of being kept for breeding and feeder cattle prices are going through the roof:
“Well, I’m not quite sure about all that, we’re going to have to get sure here, pretty quickly, it really worries me at the rate we’re butchering cows. And I personally think that this is the time to sit down with the banker, and I had a really interesting conversation with my brother-in-law, the banker, the other day about understanding the fact that a $1,000 cow, bred cow, is now worth $1,300, $1,400,$1,500. What’s the bank examiner going to say about all that? Do people understand that in this dynamic now, in all of agriculture, whether you’re in the grain business or the livestock business that it’s going to take a whole lot more money to do what we’ve always done?”
With $100 crude and $6.50 corn - Doud does not expect cattle prices to drop below $100 anytime soon.