The June live cattle contract moved higher this last week to $164.82, closer to the contract high of $166.27. Meanwhile, the Choice cutout has fallen under $300, which tells me most of the holiday beef is already contracted. The cash market is at a standstill, and most market analysts are calling for a steady to higher market. Show lists in feed yards are not expanding, and packers will need cattle.
Slaughter levels have been in the 640K range the past couple of weeks in preparation for high-demand beef consumption season. Packer margins are around $5 per head, and most plants are not running wide open. Packers are trying to take the cattle market lower, offering $168 in the South and $175 in the North. As of Wednesday, there has only been 1,800 head trade on the cash market for $176 on steers.
The House Ag Committee met this last week and discussed the state of the cattle industry which was more of a farm bill hearing. The entire meat producing industry testified, with the hog, poultry, cattle and sheep industries represented.
Perhaps the most discussed topic was foreign animal disease. The cattle industry has secured its foot-and-mouth disease (FMD) vaccine bank and has a plan if the disease enters the United States. The FMD vaccine does exist. However, there are currently no treatments for hogs and African swine fever. Poultry has no defense against Avian flu, which comes from migratory bird populations.
It has been estimated that FMD would cost the beef industry $57 million a day and it would stop cattle transport for 72 hours. It would instantly kill our export markets, and hogs and sheep would also be drastically affected.
California’s Proposition 12 was discussed, and many disagreed on the Supreme Court’s decision to uphold Prop 12. The Ag Center’s Cattle Report made comments on the Supreme Court’s decision.
“In a close decision (5-4), the Supreme Court refused to reverse a California law prescribing production standards for pigs raised outside California’s borders. This means pork sold in stores in California will be forced to provide proof the pigs were raised in a pen with 24 feet of pen space—allowing them to stand and move around. Very few pigs are raised in California, leaving the law to have implications for pig production facilities across the nation if they want to market into California.”
“In an extremely split court, the majority opinion was written by Justice Gorsuch, who didn’t see the law burdening interstate commerce but simply regulating the marketplace for pork products in California. Justice Kavanaugh didn’t agree, and in his dissent, expressed the view that the law could foreshadow a new era where states shutter their markets to goods produced in a way that offends the state’s moral or policy preferences.
“California passed Proposition 12 to ensure the humane treatment of the pigs and will likely encourage the introduction of other propositions for other meat animals and their production methods. Currently, production standards and protocols are established and regulated by each state. Production facilities are inspected and licensed by the state according to their standards.
Regulating interstate commerce is not the business of one state prescribing appropriate production protocols for other states. This overreach needs correcting by the courts or legislatively. This type of action will damage all attempts to harness inflation. Consumers need safe products and appropriate production standards but not those decided by one state.”
Every state that produces hogs is disappointed with the Supreme Court’s decision and worries that this is just one step by many other states of restrictions on other animal husbandry practices in the nation. One congressman from California said this was a moral issue placed on the ballot, and when morality enters the picture, logic fades away.
Other items on the meat industry’s wish list for the upcoming farm bill are conservation programs, risk management and trade promotion authority. Nobody appeared to support EPA’s decision on WOTUS.
Meanwhile, Congress and the Biden administration play around with the country’s debt situation and the threat of default on bond payments. We all know the recent administrations have been spending money like drunken sailors and have no will to reduce spending. They will expand the debt ceiling and kick the can down the road once more. Keep praying for rain, it’s working. — PETE CROW
