Fed Cattle
Cattle feeders and packers were again locked in a standoff last week negotiating prices for fed cattle. The tug-o-war continues this week with cattle feeders’ leverage growing.
Cash fed cattle traded steady on the week, but further gains in the wholesale beef market gives cattle feeders the incentive to stick to higher asking prices in the short run.
In this time of growing leverage, feeders should adopt a New Year’s Resolution, “I will not sell on the first bid,” as evidenced by the Eastern feeder’s ability to resist initial offers of $248 and trade at $252.
What clues can cattlemen glean from historical market activity from December to May for perspective on price trends and profit margins?
Negotiated cash cattle trade was slow to develop but finished the year strong with price advances in all regions.
Drought pushed more cattle into feedlots earlier this year and kept feedlot totals higher for longer, but the latest on feed data shows numbers declining.
Wholesale beef prices are running $20 per cwt. higher than the same week a year ago, with last week’s blizzard one factor in the rally. But retail demand for a shrinking supply will support prices into the New Year.
While the past year has produced prices more favorable to producers, the impact of drought hasn’t really been absorbed into the market yet.
Cattle prices were generally steady as packers have their holiday orders filled. Feeder cattle and calves traded mixed.
Country-of-origin labeling for beef proved to be unproductive and ineffective in creating value for either consumers or producers, argues Nevil Speer. Worse yet it comes at a cost – government programs are never free.
Market-ready cattle saw a light trade into a softer market. Packer margins are in the red, but feedlots are firm sellers with showlist numbers declining.
Why marbling matters for beef demand, and how it all depends on production management at the ranch.
Prospects for new entrants in a business are generally low if profitability requires economies of scale, large capital investment, and/or high levels of government regulation. The packing business checks all the boxes.
After realizing historic profits the past couple of years, beef packers now find themselves in a similar position as their cattle feeding suppliers experienced - shrinking margins and reduced leverage.
Cash cattle trades a week following the Thanksgiving rally saw steady prices, but the steadily declining supply of harvest-ready cattle will continue to shift bargaining leverage to producers.
How do cattle producers get better? That happens with less social media and more spreadsheets; less pandering and more professionalism; less Matrix and more Moneyball.
Packers were forced to raise bids to acquire inventory during the holiday-shortened week, extending the autumn price rally.
The combination of effects from the pandemic in 2020 and drought since 2020 has pushed the peak in feedlot numbers and cattle slaughter into 2022, well past the cyclical peak in the calf crop in 2018.
Bullish trends in CME futures last week gave cattle feeders leverage to seek higher bids as last week progressed. Packers continue to lose leverage as the fall rally progresses.
November’s USDA Cattle on Feed report estimated placements at 20-year lows and well below pre-report estimates, confirming this fall’s bullish market has settled in for an extended stay.
What number of beef processors would resolve producer concerns about “lack of competition?” Should meat processing be different than other industries?
Today’s weekly slaughter is much more robust than in 2015 and cattle supplies are at least adequate for the short term. Yet fed cattle numbers will certainly tighten as we move into 2023 due to the shrinking cow herd.
Global demand for U.S. beef has been robust in 2022, providing increased value for both cattle producers and processors that export beef.
Packers push harvest pace higher and continue to seek higher grading cattle as they look to keep the holiday rib pipeline full.
Packers were successful in filling their needs at steady money this week as wholesale beef prices moved lower. Feedyards were content to reduce showlists but remaining cattle are priced higher.
Want to make producers better off? Squishy facts, alarmist narratives and politicians won’t get it done. Instead, the path to prosperity follows real data, critical thinking, and free enterprise.
Beef exports have made a strong showing in 2022, but September data shows the second decrease in volume over the past 30 months.
Packer desires to purchase higher quality cattle gave northern feeders the advantage last week with the North-South spread at $2 to $3.
Robust beef demand continues with retailers expecting the strongest sales this holiday season since before the pandemic. Strength on the demand side continues to pull cash cattle prices higher.
The nation’s fifth-largest beef packer will receive a grant from USDA that will help add 700 head to its daily harvest capacity.