Merry Christmas to all and hopefully a productive new year for all. Cattle markets will be flat until the end of the year. Beef packers are losing money now, and it’s the producer’s turn at the trough. The beef cutout has been erratic the past few weeks, and packers will slow down production to raise the cutout values; it’s a typical tactic, and of course everyone in our industry likes seeing beef prices go higher.
The first couple weeks of January usually produce a rally on feeder cattle prices. The last feeder cattle index was at $179 last week, and we will see further advancements in feeder cattle prices. It’s been a while since we’ve seen $300 calves and $240 feeders. The only real pressure facing the feeder cattle market is the cost of feed; $7/bushel corn plus your basis is challenging for cattle feeders. And it doesn’t appear consumer demand will be a big issue going forward; folks have been paying $5 for 80/20 ground beef for some time, and it looks like $7 ground beef is very possible.
The Cattle Report wrote, “Some feedlots are entering the winter with less than full capacities. Weekly placements are showing year over year declines. Cattle owners of replacement cattle are using their leverage to squeeze feedlot competition for short supplies of cattle. Uneven grazing patterns and declining cattle numbers will provide the backdrop for smaller fed supplies well into the future. Increased emphasis on supply chain arrangements will continue throughout the industry. All beef producers downstream from the breeders will face a squeezed supply of cattle.
“Closely watched grain fields across the southern Plains have responded to recent rains and are now able to accept cattle for grazing. Timing is critical to the growth stage of the winter grain pastures. Farmers are hoping for warmer weather to aid recent moisture and provide growth for late winter and spring grazing. High priced calves placed on winter pasture for ‘all in’ gain prices of close to $1 fail to provide a hedgeable margin for stocker operations.”
Now that we have a new Congress coming in, all those cattle market legislative proposals will have to go through the process again—if you really want more market laws. Posting the various cattle contract agreements through USDA’s new Cattle Contracts Library Pilot Program was about all the cattle industry was going to get. It provides more transparency into those fed cattle formula sales. If they look like the pork contracts already posted on USDA’s website, it will more than likely create a lot of confusion. Those hog contracts get pretty technical.
I would expect to see a more friendly Congress going forward. I hope that they deemphasize the climate change thinking that has been the only guiding light with the Biden administration. Climate change is the same as a money pit because the administration has been throwing lots of money at it that we don’t have. That’s right—we the taxpayers have let government spending get way out of control. But when they started handing out COVID money, we all got in line.
The good news is that the entire country received some big moisture, wheat pastures are starting to get stocked up and the West Coast received lots of snow that it hasn’t seen for years. However, it also creates problems for cow-calf producers and cattle in feedlots, which are losing weight that costs around $1.50 a pound to put on a steer. But we have a better chance for spring grass. Just keep praying for more moisture. You may not like it now, but you’ll appreciate it later.
There is an issue boiling in the food retail business that requires some attention. Kroger, the nation’s largest retail food store chain, is working to buy Albertsons, which includes the Safeway chain. I’m not one to promote antitrust theories, but it seems to me that this merger might get out of hand. Kroger says they need the merger to compete with Walmart. Usually, the antitrust guys will tolerate three or four large national operations, like our packing industry. Competition is a great thing, and it is a key element required for a capitalist economy to function. But how do independent grocery stores compete with the big guys? I suppose we’ve been asking that question for a long time, but we find a way.
I remember reading articles in theWestern Livestock Journalin the 1960s about how large grocery chains were controlling beef prices; in those days, they were the bad guys.
We atWLJwish everyone a merry Christmas and a profitable new year. And don’t forget to ask Santa for rain and snow.—PETE CROW
