It was a pretty quiet week in the cattle markets. Feeders and packers were trying to play each other, and packers weren’t having much success. As of Thursday morning, about 14,000 head traded at a weighted average of $160.88. There is no question that the market is in the producer’s hands; you have the leverage on fed cattle.
However, winter weather is making delivery and movement of fed cattle more difficult: roads, mud and health issues are all on the table. The market has taken on its seasonal pattern and fewer cattle need to be processed to maintain demand; winter months have always been a problem. But looking forward to spring when the grilling season starts, the market will skyrocket and the fed and feeder cattle markets will move much higher.
Cattle inventory is good in feedlots, but there have been a lot of lighter-weight feeder cattle placed, which will take longer and make slaughter schedules less predictable, I think. Many cattle are scheduled for processing when they enter the feedlot. Hook space will not be a problem going forward.
There are several new packing plants under construction right now, which appears will add about 4,000-5,000 head a day in additional processing capacity. Last year it didn’t appear that there was enough processing capacity when it was really a labor issue. We don’t hear much about labor issues today because packers decided they need to take better care of their employees to maintain predictable control of their operations. With higher human resource expenses, they are still in the black and making a profit.
There has been a rash of legislation reintroduced now that we have a new Congress. If the House doesn’t pass legislation in its two-year term, it falls back to nothing and must be reintroduced. We have had the Cattle Price Discovery and Transparency Act, Meat and Poultry Special Investigator Act, Strengthening Local Processing Act and American Beef Labeling Act already reintroduced, which we debated for the last year or two.
I still can’t figure out how cattle people want the government to get involved in their market. The government is currently about justice, social justice, climate change and fairness. If the government gets involved in your cattle market, they want everyone to get paid the same for feeding their cattle. So buying those good bulls will make your calves more valuable, but it may be a wasted effort. You will get paid the same for your Prime Angus steers as the guy that sells Brahman-Longhorn cross steers. There will be no motivation to produce Choice and Prime beef if the Feds get involved in your market. All for one and one for all. I wouldn’t want that, and I don’t think you all would like that.
A lot of this legislation talks about transparency. The cattle markets must be the most transparent market in the country. Government and private market reporting ensures that. Fed cattle trades are posted twice a day and feeder cattle markets are constant. New streaming video lets you see the market happen before your very eyes—what could be more transparent than that?
I know cattlemen talk about the sweetheart deals that cattle feeders have with packers. Who really cares if they sell cattle for $155 this week just as long as they pay $180 for your 750-pound feeder steers? You have your market and they have theirs.
I like to watch the Lanesboro, MN, fed cattle auctions on Wednesdays every week. Last week they were selling steers and heifers for a top of $168; many cattle didn’t achieve that price level for some reason or another. Buyers know which farmer-feeder produces the better cattle. Lanesboro has a robust fed cattle auction where all major buyers are there, and many specialty meat processors are buying cattle based on specific attributes. Most of the time it is colored cattle.
At the NCBA convention recently, I was visiting with a Certified Angus Beef board member, and he told me they raised their top carcass weight limit to 1,150 lbs. because there is such great demand for CAB beef; they simply needed more of it, and larger carcass weights were their answer. According to our bull surveys over the past 20 years, 70% of cow-calf producers breed cows to Angus bulls. Angus influence in American beef is profound.
The cattle business is on the right track and producing a great product. All we need to do is pray for rain and hope we can get government out of our business. We already have the laws to protect the industry—shoot, you sell cattle and get paid within 24 hours. This is a liquid market no matter how you look at it. — PETE CROW
