Cash feeder cattle markets were good this past week. Groups of 700-800 lb. feeder steers were trading on Superior’s Bellringer sale in Oklahoma City for $170—higher if they sold with production attributes. If you’re producing feeder cattle with NHTC, verified natural, GAP and other attributes, you’re producing for a program. Can these programs be considered an alternative marketing agreement (AMA)? I suppose not, since they sell at auction.

The latest COVID-19 variant has slowed things down a bunch; cattle slaughter has drifted lower because employees are not coming to work. The need for fewer cattle has suspended the rapid advances in the fed cattle market, which was trading between $135-138. Hopefully packers will be fully staffed going forward. 

It’s easy to see that cattle marketing is changing; it’s difficult to sell bawling calves in today’s markets, unless you’re willing to take a lot of risk. And cattle feeders want those program cattle because they have developed a market for them. 

Reduced slaughter numbers, largely a result of labor shortages thanks to the latest COVID-19 variant, led to lower cash prices this week. On the feeder cattle side, demand has been high.

Consumers are looking for different types of beef products. Retailers have always tried to brand their beef. More and more producers differentiate their feeder cattle for specific markets, and they are more than likely going into a feedlot that has a formula contract with the packers and a contract with a retailer.

Having the Biden administration make their announcement that they will invest a billion dollars into the beef producing supply chain sounded like it might be a big deal. To me, it just seemed like they were paying lip service to the industry’s louder participants. NCBA didn’t even comment on the show.

The packing industry has made a huge windfall the past two years and it was just dumb luck they earned huge profits. The cattle feeders went into this COVID mess with plenty of inventory, packers’ employees suffered through the pandemic and couldn’t make it to work, so meat production went down and prices went up. It’s easy to be jealous of the packers’ profits when you’re not getting much. Now that cattle supplies have moderated, prices are going up and in two years, packers may be losing money.

It’s kind of interesting that when packers need product, they usually find a way to get it produced. When the Holcomb, KS, fire happened right before Labor Day, a big beef weekend, they figured out how to produce the product to fill orders. This last quarter of the year was the same way: packers had big orders for middle meats and couldn’t process them fast enough. Labor is still a huge issue.

AMAs have become common in our business and I doubt they are going away. The poultry and hog industries went that way and they appear to be working for them. They produced consistency and security in the food supply. The beef industry has been working on consistency for the past 20 years and is close to getting it right. A total of 82 percent of the beef produced today is Choice or better, and we have great demand. There is still too much carcass variation.

The corporate feeders and packers have a common interest in managing inventory. The cash market will be the primary market for feeder cattle and slaughter cows. We have a great marketing system, there are auction markets throughout the country, and they consolidate feeder cattle for cattle feeders and the feeders consolidate fed cattle for the packer. Our marketing system works well and is transparent as it gets with the live auction.

Having the federal government come into the beef cattle marketing system isn’t the right way to go. When the government gives you something like a billion dollars, there will be strings attached. The right way to go is for packers and feeders to communicate, cow-calf producers to communicate to their buyers, and seedstock producers to communicate with cow-calf producers. Communication will solve all problems. 

“Buy land, they’re not making it anymore,” said Mark Twain, which rings even more true today. Brokers who spoke with WLJ wished there was more land, as the lack of inventory and the number of buyers has made it a seller’s market.

The cattle markets are working like they are supposed to—we have good price discovery. We need the big packers so we can get full value out of the beef animal. It goes back to who can handle the hide and offal best. Small packers don’t have much of a chance at getting that value. But they have an advantage on niche products and customer service. And they need to work with producers to get the type and quality of cattle they can sell for premiums. 

Fed cattle markets are evolving and have been for the past 20 years. There will always be a cash market for fed cattle, but AMAs are working for most cattle feeders, especially the big ones. Pray for rain. — PETE CROW

What do you think?

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