A new vision for agriculture
momagri, movement for a world agricultural organization, is a think tank chaired by Christian Pèes.
It brings together, managers from the agricultural world and important people from external perspectives,
such as health, development, strategy and defense. Its objective is to promote regulation
of agricultural markets by creating new evaluation tools, such as economic models and indicators,
and by drawing up proposals for an agricultural and international food policy.
A look at the news

US beef market crisis

May 16, 2016


Beef production is a strategic sector in the United States. As the world's largest producer of beef, but also the largest importer, the industry is currently going through unprecedented turbulence. There is a lot of uncertainty surrounding the market’s future, marked by falling prices and cash flow problems, all in a context of ongoing free trade negotiations which fall short of satisfying the sector’s professionals, the TTP in particular.

The Government Accountability Office (GAO), the US Congress organism for auditing, evaluating and investigating, responsible for the assessment of public accounts of the federal US budget, has been charged by the US Senate to investigate the sudden drop in cattle prices during the last two quarters of 2015. In fact, the US cattle market experienced a sudden 15.1% drop in prices this period, while market fundamentals resisted historical increases in livestock prices in 2014 and during the first half of 2015. While none of the fundamentals changed in 2015, the question arises as to why prices have fallen so sharply. “Such a magnitude in price movements in recent months and this type of volatility is something we have never experienced before” said Ted Schroeder, an economist at the University of Kansas1.

This drop in prices comes as the United States became net importers of beef in 2014 due to the fall in production of around 6% caused by drought in the southern United States and the high price of animal feed, which resulted in the decline of herds between 2009 and 2014.

The GAO initiative is an extension of the proposal by the CME Group to limit the number of orders cancelled, by curbing access to certain types of traders on the cattle futures market and to combat excessive price volatility2. Finally, it once again raises the question of establishing risk management tools specific to this sector. Because contrary to the grain and dairy sectors which benefit from counter-cyclical subsidies and margin control mechanisms, the beef sector, along with pork and poultry are particularly integrated sectors. The concentration of players downstream in the bovine sector worries farmers, especially calf breeders, which are automated. In 2012 the United States had more than 913 000 cattle breeding farms. A report in 2009 by the US-based R-Calf USA, found that “four transformers performed almost 90% of cattle slaughter in 2008 and 2170 feedlots controlled 85% of the fattening, in the United States”3.


1 http://beefmagazine.com/cattle-market-weekly/volatility-demands-decisive-action
2 Read Momagri’s article on this subject
http://www.momagri.org/UK/a-look-at-the-news/The-CME-Group-tackles-volatility-in-the-US-cattle-market_1718.html

3 http://www.thebeefsite.com/articles/2008/the-state-of-the-us-beef-industry-through-rcalfs-eyes/


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