As discussed in a previous PCC Update, cattle prices started dropping from their all-time record highs six weeks ago. This caused some cattle economists to think the highs for this cycle are behind us. They could be right, but the fundamentals have not changed. Cattle numbers are still at a 75-year low.
Over the weekend, I asked Craig Purvines, from The Cattle Range, to send me a copy of his latest “Moving Averages” graph (below). I then asked Craig if he thought we had seen the highs for this cattle cycle. This is what he said:
“I think we have seen the highs for the next six months. Continued drought will dampen prices in the short term, but it will also cause a lot of cows to be sold due to lack of forage and hay. A higher-than-normal number of cows will go to slaughter, and there will be fewer heifers retained as replacements. The January Cattle Inventory will show fewer cows and bred heifers again – and that will trigger another bout of Irrational Exuberance.”
I’ve seen the highs and lows of four different cattle cycles – but I have never seen anything like what Craig described. Once we hit the cycle high and prices start falling, they never go up again until we hit bottom. However, I think Craig may be right this time. Cattle prices will probably set new record highs before they top out. Time will tell.
