As usual Jason is right on the money. Calf prices are down right now because of a number of items:
1) as was previously mentioned, even though you may have good grass in your area, overall there is still a lot of concern about drought. This has delayed the expansion phase of the cattle cycle as heifers are not being retained. With ample supplies of calves on the market for the available grass, it is definitely a buyers market. If local prices start creeping upward, buyers can truck calves from out of the area in as a good price.
2) right now there is a huge glut of protein on the market. As a result of Russia's recently ended ban on chicken imports, there is a lot of extra poultry sitting in cold storage right now. This is being unloaded onto the market at very reasonable prices and is cutting into the beef, turkey, and pork sales. For a good example of this just look at what has happened to Hormel (hrl) stock in recent days. Adding to the protein glut, since fed cattle profits for the feeders have been bad recently, many feeders have been holding cattle longer than normal and delaying the slaughter of these animals in hopes that the market would improve. As a result we are seeing heavier carcasses. Heavier carcasses mean that it does not require as many animals to meet the existing demand. In essence a glut of Beef is on the market. This will not clearup anytime in the near future as feedlot placements have not start slowing down yet.
3) Demand for beef is down for a number of reasons (recession, and Sept. 11 just to name a couple). As a result of this most of the major packers have been reducing their kills to stay in step with the real demand. Keep in mind that beef is a perishable product. Packers cannot just kill al they want as if the product sits too long it either has to be unloaded at a loss or destroyed.
4) As Jason mentioned, the announcement by McDonalds that they are going to begin importing Australian lean trim did not help the market. On the other hand it by itself is not doing anything more than psycholigical damage. The trim that they are projecting to import is very lean 90% trim which American producers do not produce large amounts of.
The most important thing to keep in mind is that we are part of a truly global market and many of the factors that affect local prices have nothing to do with local events.
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