The US Labor Department said US unemployment fell to 4.6% in the latest report. Whether or not that’s actually true, it begs the question — will beef demand get a boost? asked Nevil Speer, Vice President of US operations of AgriClear Inc., in his latest article in Beef magazine.
Speer’s edited comments are used with his permission.
Last week’s primary headlines, from an economic perspective, involved the November Jobs Report. The Labor Department reported 178,000 new jobs were created in November – and the US unemployment rate fell to 4.6%, the lowest in nine years.
Conventional wisdom says the strength of the report will likely be enough to nudge the Federal Open Market Committee to raise interest rates at its December meeting next week.
The FOMC action is important with respect to beef demand since consumption is partially a function of income. Hence, unemployment and wages are critical to the beef industry since they affect monetary policy and money flow.
That’s especially true when considering that beef is effectively a discretionary purchase, and is influenced by the relative prices of competing meats. A struggling economy is likely to make consumers more price sensitive at the meat case.
ECONOMIC RECOVERY TEPID BUT LENGTHY
The current expansion, while being somewhat tepid, has proven to be lengthy – 90 months in duration – making it the fourth longest in the past half-century.
With all that in mind, there are still some questions about the economy. For example, Lindsey Piegza, fixed income chief economist with Stifel, explained on the nightly Business Report that, “…the 4.6% unemployment rate doesn`t take into account all of the discouraged workers, all the marginally attached workers, all of the Americans that are right now in temporary positions or part-time positions that would prefer full-time employment. So, when we take all of those Americans and we add them back in, we`re talking about an unemployment rate closer to 10%, rather than 4.6(%).”
Meanwhile, Robert Dieli, author of “No Spin Forecast, highlights in his recent Employment Situation report the political concerns around the mixed messages from various data.
“The current set of numbers from the Bureau of Labor Statistics continue to describe the economic conditions one would associate with a long-lived economic expansion,” Dieli said. “That characterization was repeatedly challenged during the presidential campaign. Stay tuned to see which rendering will be used to plan and executive fiscal policy going forward.”
INTO THE UNKNOWN
Speer also had several questions, like how is (or does) the economy influencing beef demand? And how does the general economy influence decisions on the farm or ranch?
CASH CATTLE TRADE QUIET
Superior auction prices last week were $1 to $2 per cwt lower at an average of $110.31, down $2.20, in a range from $111.75 to $112 in the south to $109 to $111 in the north.
Cash action then got underway at $111.75 to $112 on a live basis, fading to $110 later. Dressed-basis trading was reported at $169 to mostly $170, down $5 to $6.
The USDA’s choice cutout Monday was $0.62 per cwt higher at $189.56, while select was up $2.27 at $173.95. The choice/select spread narrowed to $15.61 from $17.26 with 78 loads of fabricated product sold into the spot market.
The CME Feeder Cattle Index for the seven days ended Friday was $130.03 per cwt, down $0.62. This compares with Monday’s Jan settlement at $128.55, up $2.60.