In this file:
· Hits Keep Coming to Cash Market
· Live Cattle Falls Back Near Old Support
Hits Keep Coming to Cash Market
Brad Hulett, Drovers
September 9, 2019
The hits to the cash market continued last week when National Beef’s Liberal, Kan., plant lost most of the day’s harvest due to down time on Tuesday. Due to the shut-down, National’s cattle needs were mostly current. National, Cargill and JBS all participated, but only with limited needs.
The lack of aggressive trade was noticed mostly in the south where cash trade could not get any higher than $1.00, with some cattle trading at $99 before week’s end.
Bid in the north started higher than the south last week. Dressed cattle traded in the $165- $167 range and most of the cash cattle were $1.00-$1.04. Areas of the north pushed for a premium. However, each week closes the gap in the trade price between the north and south.
The number of harvest-committed cattle continues well ahead of normal...
Comment: Tyson plant fire burns a hole in U.S. cattle slaughter capacity
By Lisa Guenther, Canadian Cattlemen
September 9, 2019
On August 9, a fire closed Tyson Food’s beef packing plant near Holcomb, Kansas. Drover’s Daily reports that the plant’s operations manager made the call to the fire department at 8:35 p.m. that evening. Later that night, an alert from the Garden City fire department stated that roof collapse was imminent, as the fire had breached the structure’s roof.
Tyson Foods said the fire had started in the box shop. No injuries were reported, which is good news because there were about 1,200 employees at the plant that night, including 400 on the harvest shift, Drovers Daily reports. Tyson said it will be paying full-time employees weekly until the plant is up and running again. But the plant will be down indefinitely, Tyson said.
I’m sure many readers will have their eyes on bigger risks and challenges than the Tyson plant fire this fall. But, of course, Canada’s beef industry is tightly integrated with the U.S. As Deb McMillin notes in her September market summary column, the Tyson plant handles six per cent of U.S. kill, and the fire did pressure technical and cash markets. So I thought I would provide a bit more context around this fire.
Randy Blach, CEO of Cattlefax, spoke at the Canadian Beef Industry Conference in Calgary the week after the fire. He pointed out that the U.S. has record numbers of cattle on feed today — in fact, they have all year, he said.
Shackle space was already very tight before the fire, Blach said. The U.S. was slaughtering over 30 million head a year in 2010. But drought led to a decline that bottomed out at 23 million head in 2015.
“Sometimes as producers we forget how difficult it was for the packing side of the industry as we come through these time periods,” said Blach. “We didn’t have enough animals for ’em. We were closing packing plants right and left.”
That 2015 decline closed five major packing plants. Since then things have picked up, and the U.S. is basically harvesting as many cattle as in 2010. The remaining plants were already running at full bore before the fire, said Blach. Right now the packing plants can slaughter 97,000 head daily. But on a 40-hour week, they have been harvesting six per cent more than what they can harvest on a five-day week, he said.
“So we’ve been running these plants hard on Saturday already,” he said. In fact, most plants have been running double shifts on Saturday every other week.
“That is difficult work. Labour is a major, major issue when we talk about this,” said Blach.
The industry will just have to work through it, said Blach, which means moving cattle all over the place to get them to harvest. To put this into perspective, the Tyson plant slaughtered around 30,000 head a week.
The important point for those a bit removed from packing and feeding is that this is a significant disruption, Blach said. It means some uncertainty, and that likely means price risk.
The National Cattlemen’s Beef Association (NCBA) has posted a letter on its website directed to Heath Tarbert, chair of the Commodity Futures Trading Commission, asking the commission to “keep an even closer eye on the cattle markets to ensure that no market participant tries to use the uncertainty to manipulate or illegally take advantage of the situation.”
The letter, signed by Colin Woodall, senior vice-president of government affairs for the association, adds that the NCBA is not making any accusations, but...
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Live Cattle Falls Back Near Old Support
By Todd Hultman, DTN/Progressive Farmer
December live cattle fell $3.92 last week to a new contract low of $99.75, mimicking a similar decline in boxed beef prices as packer margins remain unusually high since the Tyson fire in early August. Even before the fire, live cattle prices had been falling, pressuring noncommercials to liquidate after being caught with their most bullish holdings on record in April. Technically, the trend in live cattle remains down, but noncommercial net-longs are down to 29,550, closer to neutral. December cattle prices are still looking for support and may challenge the 2016 low of $96.10.
In spite of last week's loss in live cattle prices, November feeder cattle actually gained a nickel to $130.37 last week and are still hovering near their contract low at $127.97. Noncommercials and managed futures funds are already net short, suggesting support could be near. The weekly stochastic has not turned higher yet, but so far, prices have been reluctant to trade below $130.