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Higher cattle prices reflect demand for beef; Natural gas prices slump

Mild weather blunts demand for natural gas, sending prices to eight-month low
Oklahoman Published: July 26, 2014

Here is this week's edition of Futures File, our weekly commodities wrap-up.

Cattle Stampede Higher

Cattle futures shot into all-time highs again this week, reaching $1.58 per pound on Thursday. Prices continue to rise because of a shortage of animals stemming from the multiyear drought in the Great Plains that destroyed herds and their food sources. Ranchers have been unable to restore the beef supply quickly, since it can take over two years to breed, raise and fatten cattle before they are market ready.

Despite fears that high beef prices could cause consumers to give up the red meat, there has been little sign of slowing demand as Americans continue buying burgers and steaks.

Cattle feedlot operators, who buy young cattle (feeder cattle) and fatten them with corn, were willing to pay more for the cattle this week as corn prices fell to a fresh four-year low. When corn prices drop, cattle producers can afford to pay more for cattle since their feed costs are lower. This helped push the price for feeder cattle near all-time highs as well, reaching $2.19 per pound Thursday.

Natural Gas Sinks

Natural gas prices fell to an eight-month low this week, dropping as mild weather cut into demand. About a third of all electricity generation in the United States uses natural gas as its fuel source, and a lack of hot weather is keeping many people from cranking up their air conditioning.

Meanwhile, natural gas production continues to expand and is likely to reach an all-time high this year, according to government data.

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