Be careful what you ask for from the government. Another cattle industry hearing has been scheduled by Rep. David Scott (D-GA-13), chairman of the House Ag Committee, for April 27. This would be the seventh congressional hearing on the cattle markets over the past two years.
I have never seen the government give the cattle industry this much time and attention. Generally, the cattle industry takes care of itself, and it should continue that ideology going forward. The library for cattle marketing contracts has been approved and funded, and it will be interesting to see what goes into the library. If it’s anything like the hog contracts, get ready for a lot of confusion.
It sure seemed like the noise about these cattle marketing issues was getting quiet as the market improved. We still have plenty of cattle in feedlots, and the prime marketing season is just around the corner. Boxed beef prices are starting to rise, so these fed cattle should be worth more soon.
Fed trade was established at $138 but expanded to $142 late in the week. Packers are processing cattle at a good rate, around 123,000 head per day. Some plants cleaned coolers, which put us behind 9,000 head compared to the week prior. Packers are preparing for the grilling season.
When it comes to our cattle markets, there is always something tugging it back. It looked like we could have had $150 fed cattle before this war started; I suppose you could call it a black swan event. With the recent interest in grain markets, corn and all other feedstuffs have been extremely volatile.
Feeder cattle markets have taken this on the chin; the cost of gain on fed cattle has jumped up to $1.32 per pound of gain. This is priced with $7.50 corn, so getting those big carcasses to market is going to get expensive. Will it force feeders to feed to lower weights?
An article in the CME Daily Livestock Report said, “Packers seem less concerned about price risk going forward and are limiting the number of forward contracts. This could be a function of their assessment of available supplies. Or uncertainty about forward demand. Packers seemed well positioned in April but contracted supply of cattle is still about 12 percent lower than a year ago and far lower than in 2019.
“Last year packers were adding to their forward position at a much more aggressive pace. March 21, 2022, packers booked 48,784 cattle for delivery in the next 14 months. Last year they had 95,000 head booked and they were mostly May and June cattle.
“On the other hand, beef end users have become much more aggressive in booking beef for delivery out front. This is both domestic and export demand. In the last four weeks domestic beef sales for delivery 22-60 days out have been 20 percent higher than a year ago and 31 percent higher than 2019. During the same period, sales for delivery 60-90 days out were about 30 percent higher than a year ago and 58 percent higher than 2019.
“Inflation fears and the recent price break clearly has buyers much more motivated to cover forward needs, even as prices are still on the high end of the 10-year average. We think retailers are likely driving much of the buying for the next couple months; food service is likely the main contributor for bookings three months or more into the future.
Those bookings the last four weeks are up 75 percent compared to the same four-week period in 2019. The question now is when feedlots will become current enough to improve their bargaining position, especially as packers are not well positioned with contracted cattle as they have been in previous years.”
We just need this Ukraine and Russia conflict to go away and get these trade pipelines open. North Africa is worried about not having enough bread; they are heavily dependent on Ukraine wheat. From what I’ve read this past week, Ukrainian agriculture is trying to move forward despite the bombs falling around them. Agriculture is a huge part of the Ukraine economy. However, I’ve seen reports that Russia is targeting ag operations to exacerbate hunger and starvation. Obviously, Putin is a black hole in our new world.
This next cattle hearing will be interesting. I encourage you to watch it. But letting the government dictate how cattle are sold is just the wrong thing to do. Meanwhile, keep praying for rain—we are getting desperate for rain. — PETE CROW
