PLAINS MARKET TALK
The markets were quiet Tuesday for a holiday shortened
week. Show lists increased for the second week in a row and while they
remained under prior year they were closing the gap leaving a need to
increase the slaughter rate. Packers will be hesitant to increase the
slaughter rate at the expense of box prices. If we ever reached last year's
slaughter levels, the beef production would exceed last year because of the
increase in carcass weights.
The primary feature of this past week's cash market was
the regional change. Nebraska has long been the market leader both grabbing
the highest price and holding as the toughest traders. The highest price
paid this past week was in Kansas where cash cattle topped at $163 on a
couple hundred head. Mid week trading in Nebraska featured sales at $161 but
by Friday sellers had to concede prices to $159 in order to clear show
lists. Dressed sales Friday in Nebraska were at the low end of the weekly
price range of $250-253. The volume of sales last week were larger but
packers carefully managed the slaughter rates in order to hold box prices.
Box prices firmed in early week trading. This was in part
due to the light slaughter of last week combined with a reduced slaughter
rate for this holiday shortened week. While we will remain in a good beef
consumption period for the next few weeks, retailers are making large
margins on pork
sales. Choice cuts were $1 higher at $261 and select at $249. The choice/select spread is
Month long rains and in some cases floods especially in
Texas and Oklahoma, are
interrupting normal cattle flows. More replacement cattle will be coming and
many will be heavy shortening the time spent in feedyards and helping
packers who will be looking for kill slots for late summer, especially
following the latest cattle on feed report.
The tone in the replacement market is softer and many
feedyards were showing receipts in order to manage wet and boggy pens. Many
cattle will remain on native pastures that are producing large forage
quantities and many in the southwest have not been stocked for several years. A 750 steer on the southern plains was selling for $220.
Feeder cattle purchased last fall reached an all time high
not likely to be touched for years. The direction in the coming months will
be downward for both fed and replacement cattle. Steers weighting in the 750-800# range
topped at $240-$250 cwt..
Those cattle will be moving to market during this time frame and in spite of
the fed market that has held $160+, losses will be significant.
Corn prices fell again as the crop is mostly planted and
75% is in good condition.
basis in Guymon, Oklahoma is currently quoted at +$.65 over the July
contract. Corn is
now pricing into rations at $7.50 cwt. in the Oklahoma Panhandle.
THE KNOWERS The food reform movement is active, vocal
and not likely to go away. The banner under which they parade is a noble one
– consumers need to know more about the origin of their food and how it is
grown, harvested and delivered to the ultimate user. They also demand a
healthful safe product and they should.
Unfortunately, the leaders of the movement are a disparate
lot and operate more as a cult than an investigative force using the tools
of scientific inquiry and peer review. The leaders are the KNOWERS. The
KNOWERS are a special privileged class of people who have special sources of
knowledge available only to them, by way of divine delivery, or their
authoritative status, or solely by their claims of special powers and
knowledge blindly accepted by their follows.
The KNOWERS lead the food reform movement and make many
claims most of which fail to withstand the review of logic, reason or
science. Some of the claims related to the beef industry are:
· Cattle are forced unnaturally to eat corn during
the finishing process.
· Beef, an unhealthy product, is produced as an
industrialized product by factory farmers who care little about food safety,
animal health or comfort, nutritional value of the product, or the
· Cattle are crammed into small pens where they are
unhappy and suffer throughout their lives. · Cattle are filled with
antibiotics and hormones tainting the product.
· Beef production is not a sustainable food model
and the planet’s assets and natural resources are being depleted for the
production of meat.
· GMOs are producing Frankenfoods that will have
unintended consequences for consumers. These claims are grounded in a belief
systems similar to a religion.
The KNOWERS provide the claims to the followers and they
are accepted on blind faith. The charismatic KNOWERS function much as cult
leaders of the past with emotional tugs on the followers appealing to
religiously styled moral arguments about “bad” and “evil”.
This phenomena has roots in history. The middle ages or
“dark ages” were characterized by unquestioned leaders who set forth the
truth as they understood it or wanted it. The followers accepted it based on
their faith in the King or the Duke or the Archbishop.
This medieval architecture was upended by the Age of
Reason or the Enlightenment. The Age of Reason extended a right to all
citizens to assert their common faculties of reason and logic to not only
question the KNOWERS but to postulate their own propositions. This was the
foundation of modern empirical science.
The beef industry needs to provide a trusted ombudsmen to
represent consumers of beef and those concerned about food safety and
health. The ombudsman can be charged with creating a forum for questioning
and formulating fact based knowledge about beef. This approach will
subject self-appointed authorities as well as beef industry advocates to the
proper scrutiny that is necessary find flaws and correct misconceptions on
beef products and production. Too often urban newspapers with little
or no knowledge of agriculture weigh in with stories that fail any
journalistic standards. Subjecting various issues surrounding beef
production to thoughtful analysis and applied science will benefit not only
the beef industry but consumers of beef alike.
This new Age of Reason will be a counter-reformation. The
counter-reformation needs to remind Michael Pollan that corn is in fact a
domesticated grass and his assertion that it is unnatural to feed to cattle
as he does in his book Omnivores Dilemma is bunk. Someone needs to be forced
to explain at what stage does a family farmer become a factory farmer and
what is the difference. Both small and large farmers have the same tools and
resources [i.e. a horse, a pasture, a feed bunk, a feedmill, a feed truck,
etc.]. How and why is the term “industrial” applied to agriculture? How can
we tell if a steer is happy? We can tell if he is content and that is at
the core of good beef production [nutritional balance diet, clean water,
health care]. What are the specific antibiotics used in animal agriculture
that cause disease resistance in human medicine and where are the studies
proving the link? And what is to become of the millions of acres of
grasslands that can only be converted to food by ruminants who special
stomachs can process the grass? And are we to discard the newly found
genetic knowledge that has allowed us to use the genome of plants and
animals to short cut time consuming cross breeding of the past. The beef
industry is not afraid of these issues, it simply would like to confront
them with a knowledge and fact based approach.
The counter-reformation needs to assault misinformation in
the free marketplace of ideas. The beef industry is not perfect. There are
occasions when an animal suffers unnecessarily just as there are occasions
when a product is misused. There are floods that sometimes sweep unwanted
waste downsteam. To capture an instance of either a mistake or a wrongful
act should not be an indictment of an entire industry. Going viral is a
social sensation not intended as representative of all beef production but
can be a useful tool to helping an industry get better. Hard working people
can take the knowledge of imperfections in the system to make corrections
and create better production model always sensitive to the integrity and
healthfulness of the beef product. We want each and every consumer to know
and understand the product beef, how it is produced and how it is delivered
FURTHER NOTES AND EXPLANATIONS OF BREAKEVEN/CLOSE OUT
Readers have been sending notes regarding breakeven
projections. One commenter ask how we could use 80 cents for a cost of gain
when everyone knows that is too low. Another ask why we are using such a
high cost of gain number. The two emails illustrate the difficulty of
providing one benchmark for all regions of the country. Currently a typical
bases in the corn belt might be $1 under the futures and alternatively a
corn basis in Hereford, Texas might be $1 over the futures. The northern feeders
have much cheaper grain and more expensive feeder cattle. A more meaningful
report would include one breakeven and close out for each major region. It
also is difficult maintaining the tables when both fed and replacement
prices are changing in $5-10 cwt. price blocks.
CURRENT BREAKEVEN PROJECTION
The Cattle Report introduces the FEEDER METER. The report
estimates profit or loss for currently purchased feeder steers and projects
a result 150 days out. The chart
is interactive and updated every 15 minutes in real time based on changes in
futures markets in grain and cattle. Corn basis information is based on
current trade prices adjusted every two weeks. Feeder prices and fed cattle sales are
par the appropriate futures contract.
|750 # Feeder Steer||1,652.25||220.30
|Cost of Gain 600 pounds||482.83||0.80
|Estimated Interest(Prime + 1%)||38.83||
|Net Profit / Loss||-82.99||-6.15
CURRENT CLOSE OUT
The Cattle Report estimates current profit or loss on
cattle placed on feed 150 days ago. This report generated from
industry averages attempts to simulate a typical close out based on
prevailing purchase prices for a feeder steer 150 days ago. The close out
assumes grain was purchased at market each month. Selling prices and
interest rates are based on prevailing benchmark quoted prices. This chart
will change weekly.
|750 # Feeder Steer OKC 150 days ago||1,800.00||240.00
|Cost of Gain 600 pounds||541.65||0.90
|Estimated Interest(Prime + 1%)||36.17||
|Current Texas Panhandle Cash||2,171.75||160.87
|Net Profit / Loss||-206.07||-15.26
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