All the major ag groups representing the cattle industry held a discreet meeting in Phoenix May 10. The meeting was organized by the Livestock Marketing Association and only members were invited; no association staff was allowed, which gave us a real cattleman to cattleman conversation about what they can do collectively to improve market conditions.
No one likes that the packing industry is taking all the profits in the beef industry and not paying up for fed cattle while cattle feeders are losing money. The Choice boxed beef cutout was at $323.38 last Wednesday and fed cattle were trading at $120-121; packers are earning over $700 gross margin per head.
The group at this meeting discussed elements of common concern like packer concentration, price transparency, packer oversight, Packers and Stockyards Act enforcement, level of captive supply and packer capacity.
They came up with some action items and each group was expected to take the following issues to their membership: Expedite the renewal of USDA’s Livestock Mandatory Price Reporting (LMR) which would include formula base prices subject to the same reporting requirements as negotiated cash trade and the creation of a contract library; demand the Department of Justice (DOJ) issue a public investigation status report; and as warranted, conduct oversight.
They want to see joint DOJ-USDA oversight of packer activity moving forward, as well as encouraging investment in, and development of, new, independent, local and regional packers.
Their statement concluded, “This unprecedented meeting brought together diverse producer organizations to identify issues and discuss potential solutions. These issues and action item lists are not comprehensive, due to the time constraints of this meeting. Attending organization representatives were pleased to have reached consensus on many issues and are committed to the goal of achieving a fair and transparent finished cattle marketing system.”
Ironically, the group seemed to feel that the government could help in the development of more slaughter capacity. They felt that, with all the money the feds have been throwing around, this would be a good infrastructure project.
It’s surprising that this group of 24 producers could cover this much ground in an eight-hour meeting, which gave members about 20 minutes each. They appeared to be focused and to the point with their comments and obviously all had skin in the cattle marketing business. The industry should be grateful for their initial effort.
If you stop and think about it, they all agree on improving cattle markets and spent their time on important issues. The items that usually separate these groups like Beef Checkoff and country-of-origin labeling or beef imports weren’t even discussed, I’m told.
Also, the beef industry should be a growth industry with soaring beef demand and feeding capacity. We can produce more beef with a cooperating market. Global demand for U.S. beef is growing.
I think these guys are right in that better information is required by LMR. The data is already there but it needs to be presented in a more useful way. The packers have great inventory management, which is what the fed cattle business needs. Better information equals better results and more control.
I honestly don’t understand why cattle feeders will sell cattle on the cash market for more than two weeks delivery. If you sell 60,000 head to be delivered in three or four weeks, cattle feeders can quietly build up their inventory. Forward contract commitments are reported every week, but it doesn’t mean much by itself. Cattle feeders have as much of a role in captive supplies as packers do. Don’t sell any cattle for more than two-week delivery if you want to get some leverage on packers.
Marketing fed cattle has become complicated and I’m pleased that USDA will provide a contract library to producers. And I would say that 20 percent of the cattle feeding companies finish 80 percent of the cattle. It would seem to me that those feeders could share information as well as packers do and control the flow of live cattle.
It’s great that these cattlemen took the time to meet with each other and realize their common goal of how to fix the fed cattle market and share the profits in a growing beef market. I calculated last week that consumers are spending $178 billion on beef products. Go get your share. P.S. Don’t forget to pray for Western spring rains. — PETE CROW