At a high-level summit of US beef producers in Denver, Colorado, beef producers said week-to-week fluctuations in the value of beef were presenting a challenge to the industry. Tracy Brunner, NCBA president, described the threat market volatility posed to expansion in international markets as a “critical issue”, and said the NCBA was committed to working on ways to tackle it.
“Market volatility, driven by high frequency trading, has been a major concern for producers across the country,” she said. She added that there was hope that marketplace volatility could be resolved sooner rather than later, so that producers can focus on expanding exports from a stable base.
“Trade is a critical component of the cattle industry’s profitability, and expanding exports through current and future trade agreements, like TPP, hold tremendous potential for our producers,” said Brunner. “TPP will immediately reduce tariffs and level the playing field for US beef exports to growing markets. TPP is a major win not only for the beef industry, but for all US export products, growing the economy while supporting jobs and investments in agriculture and technology.”
A report from Rabobank revealed the situation for beef producers had been worsened by soaring basis levels – the price difference between cash price and futures prices.
“Volatility is a key theme across most markets at the moment,” said Angus Gidley-Baird, senior animal protein analyst at Rabobank. “A range of factors are creating a degree of uncertainty, including… market volatility impacting the US.”
The report claimed cattle feeders have lost money for 18 consecutive months thanks to equity erosion. While discussions with the NCBA and the CME Group over resolving price volatility are ongoing, all parties have recognised there is no quick fix to the deep-rooted issue.
The bank has outlined four underlying factors driving volatility in the US beef market: the transition to a period of increased beef production; ongoing problems with excessive carcass weights; the erosion of the cash market; and an inefficient flow of information on cattle prices.