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Something Fishy with Beef and it Stinks

Jeffrey C. Borneman | October 25, 2016

Beef prices collapsing while, according to historic Supply & Demand, they should be rising. 

Herman Schumacher, co-founder of R-CALF USA, area cattle feeder and former owner of Herreid Livestock Auction, said the cattle-price freefall started soon after the U.S. Department of Agriculture (USDA) announced that cattle inventories, which were at a 65-year low in 2014, had increased by just 1 percent in 2015.

Tri State Livestock News reports: “It’s impossible for a mere 1-percent increase in cattle inventories to compress our supply-driven price increase, which should have lasted three or more years, into a single year, but that is exactly what happened” asserted Schumacher.

So, what is disrupting a core industry? Schumacher is convinced that something is interfering with a market that has been well understood for decades. 

Schumacher notes that fed cattle prices fell by more than 40 percent during the past 18 months and calf prices fell even more, declining by over 50 percent during the same period. “The price of calves in September 2016 was more than one-third less than it was in September 2015,” he said.

However, though cattle prices have fallen drastically, the price of retail beef paid by consumers remains at near record levels, falling only about 8 percent from 2015 highs. Schumacher says this is convincing evidence that something or someone is interfering with U.S. cattle markets.

Rampart will be keeping an eye on the upcoming exploratory meetings of the cattlemen to be held in November. They will be seeking the "why" of the collapse of prices and may discover the "who" that is causing it.  

Investors should be aware of the term "manufacturing scarcity" in the upcoming months as it relates to normal essentials for living.


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