Fed cattle trade was slow to develop last week, and a higher market was eminent. The week before, 120,000 head traded on negotiated cash markets at $132, and feeders were holding out for more money. Packers have holiday orders to fill and need Choice-grading cattle. Market analysts are seeing that our Choice/Prime slaughter mix is falling, along with carcass weights, which says feedlots are current and have some leverage.
The Lanesboro, MN, fed cattle auction is interesting to watch because they sell everything: dairy steers and heavy cattle—like the 1,800 pounds kind. And they sell them one at a time. A 1,500 lb. steer that was home raised and all natural sold for $140.25/cwt. It’s fun to watch a competitive auction for fed cattle.
It seems that quite a few cattle groups are starting to get excited about proposed legislation to force more cash trade on the industry. Another bill was introduced recently, the Cattle Price Discovery and Transparency Act. I’ve lost track of how many bills have been proposed regarding the cattle industry.
The new bill would require some level of negotiated cash trade for the various feeding regions within 14 days. It will contain a contract library for the various ways packers want to buy cattle. The hog industry already has them posted on USDA.gov. Take a look at them and see if you want to go down that road. Their contracts are quite confusing, especially when they bring in the basis for corn and soybeans.
The bill will prohibit USDA’s Livestock Mandatory Reporting from using confidentiality as a justification for not reporting. The bill will also require that packers report the number of cattle delivered for slaughter each day for 14 days out.
I don’t know if you should get too excited; this kind of legislation has a long way to go, and if it does become law, it will be hidden in some other important bill. It’s politics, and folks will use it for leverage to get what they want. Most of this stuff is coming out of the Northern Plains states. Quite a few Congress people and senators are up for reelection, and most of those states have only one congressperson. Midterm elections are just around the corner. And by the time this legislation is passed, we will have a new market dynamic in play.
Also, last week, NCBA’s President, Jerry Bohn, kicked out a letter to members about the progress of the 75% Plan, which they came up with to stimulate negotiated cash trade on fed cattle. They said they finally got packers to participate through a third-party mediator. Cash trade did expand with the program, but it’s looking like NCBA is throwing in the towel on this convoluted plan. They are preparing their members to start thinking about legislative or regulatory solutions, and bring them to the annual meeting in Houston next February.
One thing for sure is the cattle business is changing, which really started in the 1990s when we realized consumers weren’t very happy with our product. We measured every input that went into the national cow herd, we were fighting the war on fat, Select beef was in and big frame eight cattle were too. We were concerned about back fat, not marbling. Today, we’re producing 83 percent Choice and Prime beef, demand is great and we can’t seem to produce enough.
Lots of folks like to blame packers for the demise of hog producers when that business started consolidating. The cattle business is going through a similar phase. We’re making our product more consistent and higher quality. The hog business was in disarray back in the day because there was no consistency in hog production. Hog processors gave producers a list of specifications on which hogs they would pay the most for; they went through value-based marketing before the cattle industry did. Many hog producers pursued production contracts with packers.
I’m fine with contract production; it sure can take a lot of risk off your shoulders. Knowing what to produce and where it’s going is a good thing. As we all know, all beef is not the same, except for hamburger, which is how nearly 60 percent of all beef is consumed.
Today, there are a lot more markets available to cattle producers: natural, grass fed, organic, NHTC, Prime and the list goes on. There is a lot of opportunity out there for cow-calf producers, but you have to work at it—you can’t be a passive producer and expect to earn premiums. — PETE CROW
