In this file:
· Perspectives on a cattle market collapse
Plenty of unknowns surround the COVID-19 impact on cattle markets.
· Coronavirus threatens Montana's already struggling cattle market
… ranchers were left behind in the price increase...
· Ranch group to Alabama cattlemen: Industry's market failure is by design
… the market is dysfunctional today because the meatpacking lobby had prevented the reforms R-CALF USA has been seeking for years, including proper enforcement of U.S. antitrust laws, M-COOL, and the rulemaking to implement the protections contained in the near 100-year-old Packers and Stockyards Act…
· Pandemic causing problems in cattle market
The effect of the COVID-19 pandemic is hitting close to home with South Dakota cattle producers and at Fort Pierre Livestock Auction...
Perspectives on a cattle market collapse
Plenty of unknowns surround the COVID-19 impact on cattle markets.
Wes Ishmael, BEEF Magazine
Mar 19, 2020
Market reaction to COVID-19 was already one for the record books as futures and equities continued searching for a market bottom and worst-case scenario March 13, when President Trump declared a national emergency.
“I don’t know anything I’ve experienced that comes close to this,” says Mike Sands of MBS Research, a veteran cattle and agricultural analyst.
“This is uncharted territory. I don’t know that there is any precedent relative to agricultural markets or the U.S. economy,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University. “This is different than the Black Swan events we commonly think about.”
Depending on your definition, Black Swans affecting cattle markets include last summer’s packinghouse fire, the 2008 financial crisis, BSE in 2003, terrorist attacks on the U.S. in 2011 and the Dairy Herd Buyout in the 1980s.
“We’re at that point where we don’t know what we don’t know about this,” cautions Stephen Koontz, agricultural economist at Colorado State University. “We need to be careful in talking about what we don’t know. Let’s fall back on science and objective information.”
COVID-19 continues spread
Coronavirus Disease 2019 (COVID-19) is caused by a novel coronavirus called SARS-CoV-2. Currently, there is no vaccine to protect against it, although researchers around the world are reportedly working furiously to develop one.
“This is the first pandemic known to be caused by the emergence of a new coronavirus,” according to the Centers for Disease Control and Prevention (CDC). “In the past century, there have been four pandemics caused by the emergence of novel influenza viruses.”
As of March 18, there were 191,127 confirmed cases in 176 countries, areas or territories, according to the World Health Organization (WHO). There were 7,807 deaths.
Upon declaring COVID-19 a global pandemic March 12, Tedros Adhanom Ghebreyesus, WHO director general, noted more than 90% of the cases were in four countries. The epidemic was declining significantly in two of those—South Korea and China, the epicenter of the pandemic.
By March 18, there were 7,038 confirmed cases in the U.S.—50 states, District of Columbia, Puerto Rico, Guam, and US Virgin Islands—according to CDC. There were 97 deaths.
No one knows yet whether COVID-19 will eventually fade away, like Severe Acute Respiratory Syndrome (SARS)—caused by another coronavirus—after 2002-04, or if it will become a perennial challenge like the traditional flu. SARS infected 8,098 people and caused 774 deaths, according to WHO.
Domestic and global economies were slowing
COVID-19 provided the match and extra fuel for the panic that flattened futures and equities markets in February and March, but global and domestic economic growth was already slowing.
Domestically, U.S. stock markets climbed at a historic pace last year, but Koontz notes business investment weakened when it became clear that issues underlying the trade wars would continue to linger. As well, he says government spending stimulus was waning, while economic growth from tax cuts appeared focused in subsectors rather than the economy as a whole.
“Under any scenario, global growth in 2020 will drop below last year's level which was 2.9%,” according to the International Monetary Fund in March.
All of that is to say that the risk of domestic and global economic recession continues to increase.
“Live Cattle futures are pricing in a recession by this summer,” explains Jim Robb, senior economist at the Livestock Marketing Information Center (LMIC).
LMIC sees a 75% chance of U.S. recession by the first quarter of next year. That was before central banks in the U.S. and around the world began taking aggressive action to counter COVID-19 economic impacts.
If there is domestic recession, Robb expects it to be moderate, nothing as severe as the once precipitated by the financial crisis in 2008. Plus, he points out the U.S. economy would enter a recession in much stronger position than the last one with high employment, wage growth and elevated consumer confidence.
Even so, Robb says, “We’ve got a pile of pork and chicken, which doesn’t bode well for beef in a slowing economy.” He explains beef and lamb typically face more demand pressure than pork and poultry during tougher economic times.
Supply and demand ...
This isn’t the 1980s again ...
Coronavirus threatens Montana's already struggling cattle market
From the Here's the latest reporting on how area businesses and industries are being affected by the coronavirus series
Tom Lutey, Billings Gazette (MT)
Mar 19, 2020
Montana ranchers say they are losing money as the nation’s monopoly meatpackers turn a profit, a problem that has only worsened with the COVID-19 pandemic.
Slaughter cattle that used to fetch more than $1 a pound in Montana auction yards are now selling for as little as $0.62 a pound. Payments to ranchers are dropping even as hamburger has become hard to find in the supermarket. Live cattle futures have fallen more than 20% this year.
“They’re moving meat. It’s unbelievable, I mean record meat movement in the United States right now," said Joe Goggins of the Public Auction Yards in Billings. "The last two days the beef cutout has gone up $31, which is historic. Typically, a big move would be $8 to $9."
The cutout refers to the estimated value of a beef carcass once the animal is butchered into wholesale cuts, like ribs and loin sections that are then shipped to supermarkets to be cut into retail-sized portions.
The disparity between what ranchers are being paid for cattle and what meatpackers are paid for the cutout stretches back to the fall of 2019. A fire at a large Tyson meatpacking plant in Kansas crimped U.S. beef production and also killed more than 5,000 animals. The short supply resulting from the fire led to a sharp increase in what meatpackers were able to charge for wholesale cuts. Likewise, the retail price customers pay for everything from pot roast to steaks also increased, as illustrated in U.S. Department of Agriculture market reports.
But ranchers were left behind in the price increase...
Ranch group to Alabama cattlemen: Industry's market failure is by design
Source: Ranchers-Cattlemen Action Legal Fund United Stockgrowers of America (R-CALF USA)
via Aberdeen News (SD) - Mar 19, 2020
BILLINGS, Mont. — Speaking Friday in Falkville, Alabama, to area cattle producers, R-CALF USA director for the region and past R-CALF USA president George Chambers, and the group's CEO, Bill Bullard, provided an update on the state of the U.S. cattle industry.
Leaders from the Alabama Cattlemen's Association, a state affiliate of the National Cattlemen's Beef Association (NCBA), were present for the presentation and challenged R-CALF USA during a lengthy question and answer period on several of the group's reform-oriented initiatives. R-CALF USA answered every question and did not adjourn the hours-long meeting until every question was addressed.
"Your industry is not in the shape it's in because of droughts, floods, a strong dollar, competing proteins, or because you are poor managers or inefficient," Bullard told the crowd adding, "No, your industry is in the shape it's in by design — the design by some of the most powerful political and economic forces ever to march the halls of Congress.
He said the audience need only look at their sister hog, chicken and sheep industries to learn of the model that the multinational packers have already perfected in those sister industries and that they are now applying to the cattle industry, with the goal of capturing control of the entire live cattle supply chain away from independent cattlemen and women.
Bullard was asked what other initiatives R-CALF USA is pursuing in addition to trying to pass new legislation to require mandatory country-of-origin labeling (M-COOL) on all beef sold in America's grocery stores and the group's antitrust lawsuit against the nation's top four beef packers. He responded by stating that back in 2007 his group urged the introduction of a spot market protection bill to require packers to increase their purchases within the industry's cash market — its price discovery market.
But, Bullard explained that the spot market protection reform effort along with several other reforms such as their ban on packer ownership of livestock and their legislation to reform the packer's formula contracting methods that allow packers to accumulate captive supplies, were all defeated by the meatpackers and the NCBA.
His point was that the market is dysfunctional today because the meatpacking lobby had prevented the reforms R-CALF USA has been seeking for years, including proper enforcement of U.S. antitrust laws, M-COOL, and the rulemaking to implement the protections contained in the near 100-year-old Packers and Stockyards Act.
He said the current market's dysfunction, as evidenced by "strong beef demand, strong beef exports, and a continued willingness on the part of consumers to pay near record prices for beef, all while cattle prices remain seriously depressed" are the result of the failure of cattle producers to join together to change the negative trajectory of their U.S. cattle industry.
An Alabama cattleman criticized Bullard for supporting the rulemaking to prohibit undue preferences under the Packers and Stockyards Act because, as he said, the rulemaking would limit producers of high quality cattle from receiving a premium in the marketplace, arguing that packers would be forced to pay the same price for cattle regardless of the quality.
Pandemic causing problems in cattle market
By Stephen Lee, Capital Journal (SD)
Mar 19, 2020
The effect of the COVID-19 pandemic is hitting close to home with South Dakota cattle producers and at Fort Pierre Livestock Auction.
The sales ring sells mostly calves born and pastured in South Dakota, usually thousands each Friday, as “feeder cattle,” from 350 pounds to 800 pounds. The buyers get them fed up to “fat cattle” status of about 1,350 pounds when they are ready to be slaughtered at processing plants and turned into beef.
Four major firms, Cargill, Tyson Foods, JBS USA Food Co. and National Beef Packing, control more than 80% the nation’s beef processing plants, said Bryan Hanson, an owner of Fort Pierre Livestock Auction.
For decades, cattle producers have said there is collusion that keep prices low to producers.
The pandemic of recent weeks has added a twist: as restaurants have closed, people have filled grocery stores, some in ‘panic-buying” mode, and that’s increased demand for beef, among other things.
“The COVID-19 virus has been used as a tool by the packing industry to lower the price of fat cattle to the producers,” Hanson told the Capital Journal on Thursday. “At the same time, the consumer has been stocking up on beef, which has created high demand for beef.”
The margin between low prices that producers are receiving for their cattle and what packers are making on the hot retail beef market have rarely been this large, Hanson said.
Prices for fat cattle were mostly under $1.20 per pound this week, after being mostly around $1.42 for several months
Meat packers are making a profit of $600-$700 a head on fat cattle, based on the margins between the high prices for boxed beef versus what packers are paying producers for fat cattle on the hoof, Hanson said.
Meanwhile, those selling cattle to packers are losing $300-$400 per head “on the cattle being killed now,” Hanson said. That means those producers, to re-fill their feedlots, won’t be able to offer impressive prices to ranchers bringing in calves to Fort Pierre...