Kay’s Cuts: Price data is industry lifeblood
Steve Kay, BEEF Central (Australia)
July 5, 2019
A monthly column written for Beef Central by US meat and livestock industry commentator, Steve Kay, publisher of US Cattle Buyers Weekly
CATTLE for centuries have been the most important possession anyone could have. Even today in some countries, a bride’s dowry is paid by the husband-to-be or his family in the form of livestock.
Both families evaluate precisely what those cattle are worth before agreeing to a marriage settlement.
Yet worlds away in the large commercial livestock industries of other countries, that is also what happens.
Cattle in those industries are often bought and sold on a handshake. But the majority of finished cattle are sold via marketing agreements, forward contracts or by other pre-determined means.
What is important in all these transactions is price discovery. That is essential given that millions of dollars change hands every day of the week. Good information is the lifeblood of the industry.
But the information must be accurate and unbiased, as comprehensive as possible, timely and easily accessible, and understood by all market participants.
Fortunately for the US industry, it has a price reporting system for livestock and meat that is the envy of the world. At any given moment of the day, one can find everything from latest feeder cattle prices at auctions around the country to what kidneys or other by-products sold for the day before.
USDA’s Agricultural Marketing Service (AMS) issues more than 300 market reports each week that detail livestock and meat price trends, contracting agreements and supply and demand conditions, while protecting the confidentiality of proprietary transactions.
Given this plethora of price information, it is easy to forget it didn’t used to be like this. Packers until the late 1990s were not required to report the prices they paid for animals or the terms of sale. Rather, daily sales and price information was collected by AMS from companies on a voluntary basis. But as more animals were sold under formula pricing, other contract or captive supply arrangements, the open cash market became less helpful as a benchmark.
There were also growing concerns in the mid-1990s in the industry and Congress over packer concentration. An outcry about the hog market and the ongoing concentration concerns prompted Congress to pass the Livestock Mandatory Reporting Act of 1999. AMS implemented its Livestock Mandatory Reporting program in April 2001.
Reporting was developed to facilitate open, transparent price discovery and provide all market participants, both large and small, with comparable levels of market information for slaughter cattle, swine, sheep, boxed beef, lamb meat, and wholesale pork, says AMS.
The LMR program has been re-authorised regularly since then. The current LMR authority is set to expire September 30, 2020. AMS has also, in consultation with industry groups, added and expanded its cattle and other reports.
The latest began the last week of June when AMS expanded the purchase categories on LMR negotiated cattle reports to include dressed FOB and live delivered information.
“No other country with a cattle feeding sector of any size publishes monthly reports”
As mentioned, AMS issues hundreds of market reports each week. Some are issued daily, such as its regional direct cattle slaughter report. AMS reports on any fed cattle sales in Colorado, Iowa/Minnesota, Kansas, Nebraska and Texas each afternoon and then summarises the prior day’s sales the next morning.
These reports provide a comprehensive breakdown of transactions, from negotiated cash and negotiated grid price ranges and average prices to head count and average dressed weights.
USDA also publishes monthly Cattle on Feed reports. No other country with a cattle feeding sector of any size publishes monthly reports, let alone in the detail of the USDA reports. They provide on-feed inventory, placement and marketing data for the 12 largest cattle feeding states and a US total. They also provide a placement breakdown in six weight categories, from under 600 pounds to 1000 pounds and over.
“This and other USDA data gives cattle producers added confidence to make informed marketing decisions”
These breakdowns are valuable in allowing analysts to forecast likely marketings in the months ahead. This and other data that USDA provides each week or month give cattle producers added confidence to make informed decisions about everything from selling their calves to retaining ownership through the feeding phase.
On the meat side...