Cattle markets have turned stronger after the post-Labor Day lull. Packers enjoyed a profitable August and September. However, margins turned south as the beef cutout fell below $300. Now that they are experiencing losses, they will more than likely lower production speeds in an effort to advance the cutout value. They are now experiencing higher cattle costs.
Fed cattle markets have been higher the last two weeks. Packers bought 81,000 head on the cash market two weeks earlier, which is always a market maker. The futures market turned higher with the October contract reaching $187.42 on Wednesday; there doesn’t seem to be much of a positive cash basis on fed cattle at this point.
Packers will be looking to build their rib and loin inventory for the holiday season, which usually carries the cutout into January. I’m sure the grocery retailers are making those orders now for the holidays; higher fed cattle prices typically follow this seasonal trend. There has been some fed cattle trade at the handful of fed cattle auctions for over $190 last week.
Feeder cattle also moved higher with the October and November contracts higher by $3.50-plus, moving the market to $249.70 and $248.55, respectively. This is despite the advance in corn prices, which are currently around $4.30 a bushel. Cattle feeders have enjoyed a 95-cent cost of gain on current closeouts.
Cattle feeders have already bought all the true yearling feeder cattle and will start buying lighter cattle to fill pens as they did during the as-low cattle inventory in 2015, they just need to get their hands on the inventory. They will find grass to hold those calves and contract with growyards just to hold inventory.
It doesn’t appear that cow-calf producers are ready to start herd rebuilding quite yet. With the average age of producers at 63 years old, there may not be enough stamina to do so. There are not many bred heifer sales scheduled in November or December to suggest that trend. Those that will be offered are from outfits that have regular bred heifer sales every year or every other year, and I don’t expect to see them bring more than two times the price of a calf.
Now I’m going to write about something I usually refrain from writing about, which is politics. Just in the past week, this country has experienced many setbacks both domestically and internationally.
Hurricane Helene in the Southeast has crippled that region. It is rare to see a hurricane maintain its strength and devastate Asheville, NC, a town where folks run to escape costal hurricanes. It’s now five days at the time of this writing since the disaster and FEMA has yet to show up with basic solutions. Not a good response from the federal government.
Then we have a serious longshoreman strike, who are asking for a 77% pay raise. Union labor seems to have found some leverage and is holding the world hostage; nothing will come in or out of East Coast and Gulf ports. The Biden administration can legally intervene and put those folks back to work while they negotiate a fair contract, which would be best for all. It’s sad when one group can hold the country hostage.
Then we have an escalating war in the Middle East and Eastern Europe. It’s clear that Israel is going to retaliate from the recent Iranian attack, and I can’t see how this won’t end up in a full-out war, but I guess it already is for Israel. I’m convinced that the appeasement strategy isn’t working.
And then there are so many other policy issues that haven’t worked: immigration, economy, energy, climate change and the list goes on and on with failed policies. The political divide is becoming a serious issue and our politicians on both sides of the aisle need to tape up and get over partisan politics and start governing the country for the masses.
The election is less than 30 days away and we all know that this current administration can’t do the job. I know that I’m preaching to the choir for most of you. For me, it’s a classic “bird in the hand is worth two in the bush” situation. Elections always come down to the lesser of the two evils, but for me, the choice is clear. — PETE CROW
