Not much came out of the powwow. The live cattle marketing meeting was relatively quiet now that markets have improved. Two years ago, folks were desperate after the COVID situation upended markets. Folks were getting angry that packers made a windfall profit during the pandemic. But now it’s the cow-calf guy’s turn to make some money.
I would have to say the big discussion was around traceability and the USDA’s plan for an identification regimen for cattle crossing stateliness. Folks have been working on this issue for a long time and have come up with reasonable plans to protect producers’ confidentiality. USDA wants to make the program mandatory, and NCBA still insists it needs to be voluntary; the comment period is open if you wish to address the issue.
Disease traceability is an important issue, and global trade, international travel, black market trade and the flow of folks crossing the southern border all present disease concerns. It seems like every now and again someone gets caught trying to bring foreign meat products into the U.S. and one of these days, they may arrive.
This is an issue that has been discussed for 20 years and I really can’t see how a couple dollars for an electronic identification tag will break the ranch bank account. With calves trading at $1,200 a head, I would just think of it as good inventory management and good business. You need to remember the average cow herd in the U.S. is around 40 head. I would have to consider those operations’ passive producers who sell through auction markets and then consolidate into larger management groups.
The USDA’s Agricultural Marketing Service (AMS) kicked out its beef cattle contract library pilot program during the meeting. I think it confused people more than it answered their questions. They never intended to show you complete alternative marketing agreements or formula contracts. It may take until next September to get enough data in the program to be useful, which is just about when the pilot program is set to expire.
It does, however, show producers what premiums and discounts for various carcass and production attributes are. I’ve never been sure how cow-calf producers would use this information other than giving them incentive to join and produce for a branded program. I’ve always thought that with all the cattle marketing legislation proposed over the past few years that the cattle contract library would happen in order to placate cattle producers. It’s an easy tool for AMS to provide. We’ll see.
The annual cattle inventory was released just ahead of the meeting and showed the total inventory down 3% to 89.3 million head. The beef cow herd was down a million head from a year ago to 28.9 million head, the lowest beef cow inventory since 1966 and the largest decline since 1989. Beef replacement heifers were down 5.8%, or 320,000 head, to 5.16 million head. We’re not quite as low as the herd was in 2014, which was about 28.2 million head. But with stronger demand, beef prices should take off soon.
It doesn’t appear that we will see any herd expansion this year. Bred stock values will expand now, and producers will hold back more heifers as long as moisture conditions hold strong going forward. Bred heifer values were fairly strong this past fall and should be very strong going forward.
Actually, markets are moving higher and cattle feeders are holding out for $160 and higher and should be able to get it. Trading practices generally develop late in the week, when the market is expanding. We heard fed trade went into Friday evening a week earlier. Packers have been watching the cutout values decline and have cut production levels, hoping to raise cutout values because they are going to have to pay more for fed cattle.
Feeder cattle markets were sharply higher this week, advancing $5-7 at auction markets. Feed cost will continue to regulate the price of feeder cattle, but demand should ease the pressure. Futures markets have feeder cattle priced in the $190s for April, and August feeders are at $207 and higher later in the fall on the deferred contracts.
One can feel the enthusiasm in the cattle business. The market is right, moisture is right and we begin a new cattle cycle. Keep praying for spring rains—it’s good insurance. — PETE CROW
