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Beef cost pullback is expected

January's phenomenal record run of wholesale beef prices may have run its course, according to Derrell S. Peel, Oklahoma State University Extension livestock marketing specialist.

Choice and Select boxed beef prices peaked Jan. 22 at $240 per hundredweight for choice and $237 for select, Peel said. Choice boxed beef dropped back nearly $3 by Friday, with Select dropping just over $1. 

"This leaves a very narrow Choice-Select spread of $1.98 per hundredweight," he said. "This level is close to the seasonal low in the Choice-Select spread, but it usually does not occur until March or April."

After such a dramatic run, a pullback in both wholesale and fed cattle prices is more expected than not, he said. The major question and big unknown is just how much prices might drop back. While a series of very short-run factors contributed to the unexpectedly large and rapid increase, the underlying longer-term fundamentals are in place to support strong prices.

Part of the current market run, Peel said, has been due to short-bought retailers and post-holiday refilling of pipeline supplies, and it is not clear how much is due to demand strength looking forward.

"Assessing demand will be an ongoing process in the coming weeks," he said. "Meantime, supplies will likely stay relatively tight. Winter weather could play an especially important role in the ability to rebuild short run supplies. The market picture may clarify significantly in the next two or three weeks."

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