Global Economies Seen Continuing Halting Recovery

The world’s economies are recovering slowly and were expected to continue the trend into 2017, which bodes well for beef demand and live cattle markets.

Economists will say people will use extra income to better their way of life, and short-term pleasures will take precedence over long-term objectives first.  To that end, increases in income will generate increased food demand, and most will make changes in their protein demand and consumption as soon as possible.

The poorest of the poor will make adjustments in total volume of food, but once this demand is met, adjustments in quality, which translates into a sense of better quality of life will be dealt into the mix of food items purchased and consumed.

As people work their way up the economic ladder, more of them will be able to afford the most expensive of proteins – beef.  And, as they increase in income level, they can afford increasingly better quality of beef meat and beef for eating pleasure.

 

US BEEF IN THE CROSSHAIRS

 

That puts US beef in the crosshairs of a rising number of people in an economic recovery.  US beef has a reputation for being grain fed in a confinement facility (feedlot).

The combination of high-energy feed and no strenuous exercise for the last few months of their lives leads to a fattier and more tender beef product with a higher level of pleasure while eating.  This is far from sustenance eating, but as a greater number of the world’s consumers reach this level of consumption, it will create a greater level of buying interest.

And since any one type of product (US beef) is limited in supply, the price for this product goes higher with increased demand.

It takes longer for US beef to make inroads into an emerging economy, but once the taste for US product is in place (demand), market sources say the buying interest resurfaces quickly as economic conditions improve.

 

IMF SEES “RESTRAINED GROWTH ACCELERATION”

 

The International Monetary Fund, in its latest “World Economic Outlook,” said it expected to see continued herky-jerky economic recovery around the world in 2017 based on aggressive monetary and fiscal policy, inflow of capital into emerging economies and an end to the falling prices of natural resources.

Global economic recovery was expected to continue in the industrialized nations as the corporate sector recovers.  US growth likely will accelerate, the IMF said, supported by aggressive fiscal policy.

However, the economies of Japan and Europe were expected to continue the 2016 trend of low growth as they are weighed down by uncertainty.

As the US forges ahead, currency exchanges likely will see the US dollar strengthen.  The IMF didn’t say so, but a higher greenback will hinder growth in US exports, including beef, unless consumers see it as a sign that everything is improving.

 

CASH CATTLE TRADE HIGHER

 

Average auction prices last Wednesday were $2.71 per cwt higher at $115.39, versus $112.68 a week earlier.  Cash cattle then traded in Nebraska at $115 to $116.50 on a live basis followed by trades elsewhere up to $118 on Thursday and Friday.  Dressed-basis trades ranged from $188 to $190.

That compares with last week’s full range of $113.25 to $116 live and $180 dressed.

The USDA’s choice cutout Tuesday was unchanged at $203.33 per cwt, while select was up $0.73 at $193.57.  The choice/select spread narrowed to $9.76 from $10.49 with 100 loads of fabricated product sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Friday was $133.15 per cwt, up $0.72.  This compares with Tuesday’s Jan settlement of $130.20, down $0.25.