Cold weather moved in and it looks like it intends to stay awhile. We can sure handle cold weather, but it would be better if some moisture came with it, and we can sure do without the wind. Meanwhile cattle markets scratched out higher cash trade. Feeders are resisting as hard as they can to avoid paying up for cattle. Packers have had the longest and richest profit margins they have ever enjoyed. Beef demand is great but, as we all know, not much of the windfalls are making back to the producers’ pockets.
The corn market took a big hit last Wednesday, down 21 cents. It’s still over $5, which is still good for the farmers but not so good on the feeder cattle market. This cold weather has slowed movement down in the auction markets. Speaking of auction markets, I still can’t believe Shasta Livestock Auction is closing—the end of an era.
There were 66 tenders made last Tuesday on the February futures market. Feeders are so frustrated with the fed cattle markets they will start delivering hedged cattle. I’m sure they were hedged better than the $114 market that developed last week. It still looks like we will see trade late in the week, like last week. The Texas Cash Pool sold around 700 head at $114.20, about $1 higher than the week before.
Our cattle feeding friends in the Southern Plains are sticking to their effort to increase their negotiated cash trade. Texas, Oklahoma, and New Mexico sold 17.4 percent of their cattle on the negotiated cash market the week ending Feb. 5. Kansas feeders traded 19.4 percent on the cash market, so they are intent on fixing their own problem.
The Fed Cattle Exchange (FCE) appears to be offering more cattle than normal, but it looks like only half a dozen feeders are participating. They have been adding features to the site, centralstockyards.com, that will give you a better idea of what bid the grid is and how it works. It’s an interesting website and I encourage you to check it out. I don’t think they offer enough cattle for the packers to get real interested. More folks need to offer cattle up on these markets—the Texas Cash Pool, the Kansas Cash Pool and the Fed Cattle Exchange.
If you can force the cash price higher, you’ll get a better formula price going and everybody wins, so give Consolidated Beef Producers and the Fed Cattle Exchange a call and consign a good pen of fed cattle. It’s better than mandating the 50/14 plan through legislation.
I haven’t looked at a grid pricing table for a while. There are some new features on the FCE site that will help explain the Bid-the-Grid concept. Currently the premium for all-natural carcasses is $26.43 cwt. The premium for Non-Hormone Treated Cattle (NHTC) is $22.43 cwt. Remember the benchmark is Choice, which is $0, but Certified Angus Beef is just a $5.02 cwt premium and Prime is a $14.77 cwt premium. Then you hit the big ones for hard bone, dark cutters and small carcass size. Discounts for yield aren’t all that bad or making them too big. So now it’s easy to see why those NHTC feeder cattle sell so well.
Carcass weights have been a big issue this year and have added extraordinary beef tonnage to the market. The weekly beef production report shows that all cattle slaughtered were 16 pounds heavier than last year. If you figure that out, 16 pounds over 26 million head of cattle, it comes up with 416 million pounds of extra beef from heavy carcass weights alone. Right now, the industry is producing 550 million pounds of beef a week; the same week last year we were processing 525 million pounds.
The Livestock Marketing Information Center has kept a database on carcass weights over the past 60 years and says the average annual gain has been 4 lbs. a year, but over the last 15 years it was 5 lbs. annual gain. The year 2020 will be one of the largest gains in carcass weights at 28 lbs. higher than 2019. The year with the biggest gain was 1994 with a 29-lb. gain in carcass weights on dressed steers. Stay warm and pray for spring rain. — PETE CROW
