Here we are; it’s Christmas time and the new year. I certainly hope everyone has a merry Christmas. And I think it’s time we forget 2021, the second year of COVID-19 and all of the variations. I got the shot and feel fine, and I only wear a mask if everyone else is. Now it’s kind of a social responsibility or something like that.

Cattle markets are ending on a good note; most live fed negotiated trades were $138, down two bucks from a week prior. Packers have two short weeks to contend with, and it looks like they have plenty of contract cattle around them, for now. Generally, we see a nice spike in the first two weeks of the new year—sometimes I think they are tax motivated sales.

The cattle market traded slowly throughout the week, unable to find many gains technically or fundamentally. Cash trade was mediocre, thanks to feedlots holding out and packers unwilling to pay more. The market is likely to continue its slow movement forward as the holidays take over.

Thursday morning, the fed cattle report showed the weighted average was $137.50 on 36,000 head, and dressed sales averaged $218.19. But formula sales showed feeders delivered 27,600 head with an average carcass weight of 905 lbs. and averaged $230.34—that’s a $12 difference. There was roughly $350 per head more selling on the formula last week. There is great demand for Prime beef, prime ribs—which the cutout value showed them trading at $7.44/lb.—and Choice was traded at $4.52/lb. These packers are wanting cattle that grade Prime right now.

At least we have cattle feeders making some money now, and we need to regain our part of the beef dollar. Steer carcass weights hit 928 lbs. the week ending Dec. 4, an all-time high. This may be a sign that we may be becoming less current in feedlots. Typically, slaughter rates go down during the winter months and come roaring back in April. We want cattle feeders to do well so they buy your high-priced feeder cattle going forward. 

We had some robust fed cattle trade the past month, with more than 110,000 head selling each week the past four or five weeks. Right now, it appears we’ll be well short of that kind of trade through the new year.

We’ve been hearing a lot of chatter about the pending legislation on the cattle contract library and Livestock Mandatory Reporting (LMR). Then there are our friends at R-CALF, who aren’t too excited about the legislation and want to support Sen. Cory Booker’s (D-NJ) bill, S.949. 

The House of Representatives voted on Dec. 8 to move forward two bills relating to market transparency. The bills have the support of the National Cattlemen’s Beef Association, which says the bills are critical to providing producers with greater transparency in the cattle markets.

Bill Bullard, R-CALF CEO,  said, “The Fischer-Grassley bill, S.3229, will instead be a boon to packers, allowing them to continually purchase cattle for less than their competitive value, and that means it’ll be a bust for America’s cattle producers.” 

Bullard says his group continues to support the original cattle market protection bill, S.949, which they think will allow cattle producers to benefit from a robustly competitive negotiated cash market by mandating at least a 50 percent volume level.

The 50/14 idea is somewhat destructive in my mind; the fact that feeders trading on the formula seem to be selling dressed cattle for $12/cwt more, $230 versus $218 dressed, should make you stop and think about how this market works. Most weeks, the formula trades yield more dollars to cattle feeders that use them.

Meanwhile the NCBA and other livestock groups are supporting the Cattle Contract Library Act and the LMR-funding legislation but not any of the mandatory cash trade proposals that have been floating around. Most cattlemen don’t want the government involved in livestock markets.

It’s going to be interesting when NCBA gathers in Houston this February. The live cattle marketing committee has realized their 75 percent trigger plan has essentially failed, and now they are obligated to discuss legislative solutions. We all know they don’t want to go down that road.

The market has been working like it’s supposed to: supply and demand. I just hope we haven’t ruined consumer demand with record-high prices. My daughter sent me a picture of a whole boneless prime rib at Costco—a great place to buy beef—and it was $17.99/lb. at 22.3 lbs., for a total of $401.72. Granted, that’s a huge piece of meat, but how many consumers are going to pick that up?

Packers have had extraordinary margins this past year, and they are starting to normalize. The Livestock Marketing Information Center says the five-year average on packer margins is $245 per 1,000 lbs. of steer. They assume that fed cattle values will average $138 the first half of 2022 and that Choice boxed beef would need to average $234 to return packer margins to the five-year average. I think that can happen. Pray for rain, and have a merry Christmas. — PETE CROW

 

What do you think?

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