One could learn a lot about cattle values watching the wave of video auctions this past week. The volume of cattle, the location of those cattle, and the production protocols that various cattlemen use has a tremendous effect on value and ranch income.
“Just selling weaned calves is old school. The more information you can provide to potential buyers is an added value in today’s market.” — Pete Crow
Just last Wednesday on the Superior Livestock sale, a set of 550-lb. Angus steers sold for $150/cwt. They were regular with Vac 34 protocol. Then a set of 575-lb. Angus steers sold a few lots later for $184/cwt. Those cattle were GAP 4, and NHTC certified, detailed for a variety of beef programs. That’s a $34/cwt. difference between similar calves from the same region in Colorado, which amounts to another $195.50 per head in gross revenue. There were examples of this value difference all day long.
It must make a guy wonder if doing all those extra management details is worth it. It looks to be so in my view. These are market signals that require paying attention to—$200 per head is too much money left on the table. Especially when that $200 is the difference between making a profit on the ranch or not.
Then there are other attributes like feed efficiency data or grading information that many ranchers have started to add to their notes in the sale catalog. Just selling weaned calves is old school. The more information you can provide to potential buyers is an added value in today’s market.
Those old lessons about not getting any data back on your calves are still true. If they perform well in the feedlot or grade well on the rail, you will never know unless you feed some of your own cattle or enter an alliance that will help you get that data.
Just because they are a certain breed, like Angus, doesn’t mean that much anymore. Those calves must be healthy, perform well and hang well to get top dollar. There are a lot of premium markets and programs out there, but you need to know what you have and what you’re working with.
Now let’s turn our attention to the pending trade situation. The Senate this last week took a test vote on a bill that would require congressional approval of tariffs designated for national security reasons. The bill passed 88-11, which sends a strong signal to the Trump administration to be done with all the trade talk.
Is President Donald Trump doing the right thing? Our new Chief Agricultural Negotiator Gregg Doud seems to think so. In his first speech after being confirmed, Doud said that China has been breaking the WTO trade rules and has been subsidizing their farmers with market price supports to the tune of $100 billion. He pointed out that China currently has 47 percent of the world’s residual supply of wheat, 40 percent of the corn, 66 percent of the rice, and 22 percent of the soybeans, which distorts true supply demand fundamentals and hurts farmers around the world. He said that we need transparency.
It is ironic how many and how much feedstuffs are exported to Asian and Middle East markets. Seems to me that it would be much easier to import the meat and dairy products they want rather than the feed. China does consume lots of soy products, and the U.S. exports around 35 percent of soybean production to China.
Reports are saying that U.S. bean exports to China have risen dramatically over the past two months. China has also been on a buying spree in Brazil, which has prompted other countries to buy more beans.
China has imposed a 25 percent duty on U.S. soybeans and beans have dropped about 20 percent since this skirmish started. I’m not sure how the international soybean market works, but it appears that the market has compensated for the duty.
Brazil is the largest supplier of soybeans to China but can’t supply all their needs. Several reports have suggested that Brazil could start importing U.S. soybeans to fill orders, simply transshipping U.S. beans to China.
I suppose that cattle producers will receive the benefits of lower grain prices in reduced feeding costs. The prices for feeder cattle have remained quite strong. Hog producers and soybean producers have taken it on the chin on this trade rub. Live hog prices have dropped $8 on the August futures over the last few days.
Let’s hope that this episode passes quickly, as we all know markets don’t like uncertainty and grain producers can’t afford this drop in commodity prices as farm revenues have declined over 50 percent since the peak in 2013. — PETE CROW
