Over-Committed Supply Becomes A Burden
The lower cash market last week was not a surprise. Packers had a lower inventory need due to the shorter holiday week. The biggest surprise was that the north region was first to sell cattle, and before week’s end, the cash selling price was lower than the previous week.
The north sold cattle at $106 at the beginning of the week, but by Thursday $104 kept cattle moving for future delivery. The south price continued its decline because of the current bargaining power. The most the south could get was $103, with little participation from all packers.
Feeders will need to determine if the dip in the market was specific to the holiday, or can the packer negotiate lower cash to keep cattle moving? Rumors of feedyards committed to Tyson are beginning to back up on shipments. If this is true, and it continues to be a problem, many of these yards will begin seeking marketing options with other packers.
The more these situations arise in the marketplace the more they help shine light on what some consider the core issues of our market. If anything good comes from the Tyson fire, maybe it will be that everyone will realize the burden of our over-committed supply. Also, how with a lack of producers willing to participate in the cash market, the packer has all the leverage they need.
