Page 12 - MWC 10-27-2022s
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FARMERS FACE                                                                              The Midwest Cattleman · October 27, 2022 · P12
      continued from page 3
      ebbs and flows throughout  of the Choice re-
      the cattle and beef market- tail           beef    value
      ing chain regarding market  thus far this year,
      leverage and relative pric- that spread has in-
      es.  When feedlots are chas- creased by 96 cents
      ing a relatively tight supply  per pound relative
      of available feeder animals,  to before the pan-
      feeder prices tend to outper- demic. Meanwhile
      form  fed-steer  values  (think  the wholesale-farm
      late 2014 and most of 2015).  spread is 24 cents
      When the number of finished  higher.
      cattle in feedlots strains            Comparing the
      available beef processing ca- three  most  recent
      pacity, processing margins  months             of   data
      increase.                          (J une-August)
         Now  that we  are  about  to the same pe-
      2½ years removed from  riod of 2019, the
      the extreme turmoil that  retail-wholesale
      the    COVID-19       pandemic spread is 88 cents higher,  inflationary pressures ease,  the percentage of retail dol-
      wrought upon the cattle and  while the wholesale-farm  but that chances for return- lars reaching the farm level
      beef supply chain, it is in- spread is up 7 cents.                    ing anywhere near pre-pan- will struggle relative to the
      structive to consider how re-         The retail-wholesale beef  demic levels are slim.                 pre-pandemic average.
      cent marketing margins have  spread tends to be more af-                Consumer beef demand               Brown is a livestock econ-
      changed relative to before  fected by general macro- has  recently  proven  very  omist with the University of
      the pandemic, and what the  economic factors than the  resilient, and there is still  Missouri. He grew up on a di-
      continued evolution of these  wholesale-farm spread.                  optimism that tight cat- versified farm in northwest
      margins might look like in         Supply chain pressure              tle supplies in the next few  Missouri.
      the years to come.                    With labor, energy, trans-      years will provide further
      Retail price analysis              portation, and packaging           price increases to producers.
         Margins during 2020 and  costs much higher today than              But as costs for everyone in
      2021 were omitted from the  pre-pandemic levels, it is not            the beef supply chain have
      graphic below because of the  surprising that retail-whole-           risen sharply since 2019,
      extreme nature of events that  sale spreads for many com-
      affected them during this pe- modities have increased. But
      riod. Although typical supply  how likely are they to return             www
      and demand forces were also  to pre-pandemic levels?
      at work during this time, ex-         Examining annual USDA
      ternal shocks to the system  data on the beef retail-whole-
      because of the pandemic  sale spread from 1970-2019,
      often overwhelmed normal  there have been 14 out of 49
      market responses, and hope- years when this spread did
      fully, they are not repeated  decrease amid its general
      anytime soon.                      upward trend. However, the
         When we compare the  largest percentage decline
      first eight months of 2022 to  relative  to  a  prior  peak  has
      the same period of 2019, we  been 10%, with declines typi-                     P
                                                                                                        NEWW Taragate Geared 3:1 Reel Taragate Geared 3:1 Reel
      are in a much different sit- cally smaller than 6%.                                               NE
                                                                                                               holds up t
      uation  today with the beef           This provides some opti-                                           holds up to 1320’ PolyBraido 1320’ PolyBraid
      retail-wholesale  spread. Ac- mism that the spread could
      counting for $3.61 per pound  work lower if macroeconomic
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