Last past week was a wild ride in the cash cattle market. Some producers began to let cattle go Monday morning at $105. This trade was short-lived and most feedyards chose to hold out for more money. By the end of the week most cash cattle in the south traded at $110-$113.
The north was more of the same. They started off with cash at $105 and continued trading up to $112 by the end of the week. Dressed cattle ranged from $170-$175. Much of the run up in the market was due to the skyrocketing beef cutout, and the coming together of many producers to help support the cash market.
In today’s world of social media, everywhere you might surf we see concerns and enraged comments directed at or against packers for the disconnect between the cash market, the cutout price and packer profitability. Packer margin is significant. However, why is packer profitability the only focus, and we are not as outraged about the other “elephant in the room” issue within our market?
For example, the CME live cattle contracts have followed the declining stock market step-for-step since COVID-19 became an escalating national concern. The fact that the cattle market declines parallel to the declining stock market should indicate that the packer is not the only concern to the beef producer.
Producers who are calling for government interaction should also discuss how the CME, hedge fund managers, and computer trades have taken the live cattle contract hostage. Additionally, we continue to have more committed cattle willingly turned over to the packer without price negotiation.
Agreeably, large numbers of cattle in our industry deserve a premium on some type of a grid. The question becomes, by negotiating a price with the packer on these cattle could we leverage a higher cash price? Many in the cattle industry, feel that our live trade marketing is broken. The answer is in front of us. It’s called the cash market, and all we have to do is actually use it.