In this file:
· Covid-19 creates challenges for the cattle industry
· Pandemic Deepens Crisis for Ranchers, Cattle Farmers
Covid-19 creates challenges for the cattle industry
Carrie Stadheim, The Fence Post
March 23, 2020
Through a late Friday announcement, cattlemen learned that Tyson will pay $5 per hundred weight more than the agreed-upon price for all cattle slaughtered during the week beginning March 23, 2020.
U.S. Cattlemen’s Association Region X director, Justin Tupper, St. Onge, S.D., said the announcement came “totally out of the blue” and that last weeks increase in boxed beef prices was unprecedented.
“Boxed beef values increased by about $42/cwt. On a 900 pound carcass that equates to almost $400 more that the packer is pocketing.”
The St. Onge Livestock manager was stunned with Tyson’s announcement, which he said is a “drop in the bucket” — probably around $60 per head extra that feeders will see.
His organization has been urging Congress to ask for Department of Justice investigations into possible misconduct on the part of the packers.
“I’m sure they have been getting some pressure after the unprecedented rise in boxed beef prices,” he said.
Live cattle (finished cattle) were selling for around $105/cwt last week, Tupper said, while boxed beef was worth $154/cwt.
March and April are historically the best months of the year to sell fat cattle, said Tupper, so the market tumble is hitting especially hard.
The cattle market has felt the effect of COVID-19 (coronavirus) for weeks now.
Economist and rancher Brett Crosby, Cowley, Wyo., said he is working with the U.S. Cattlemen’s Association to determine how many dollars feeders and cattlemen lost in value, due to the coronavirus pandemic. The organization plans to submit a request for an aid package from the federal government.
“The backgrounders and the feeders are the two sectors hit the hardest,” he said, because backgrounders are normally selling weaned calves this time of year to go to a feedlot or to grass. Feeders have finished cattle ready to slaughter, and every day the cattle wait to be marketed, they gain extra, unneeded fat and lose value, regardless of the market situation. In recent weeks, they have lost significantly more value daily because of continued slide of the market.
Fat cattle have diminished in value upwards of $140-$200 per head, he said, which equates to a a devaluing of $5,000-$7,000 or more for each load of cattle sold. Many of the cattle headed to slaughter were already being fed at a loss, he said.
Meanwhile, packer margins remain strong, said Stephen Koontz, Colorado State University ag economics professor.
“Packers are being paid well to attempt to stay open,” he said. The meat processing industry struggles to find workers on any given day, and the current pandemic only exacerbates that problem, he said.
“That packing job is one of the hardest in the world, it’s going to be hard to get people to work there when a lot of other jobs pay comparably.”
The drop in the live cattle market was to be expected, although not as severe, even before the coronavirus hit the media, he said.
“We had big numbers, big weights,” he said, and added that the U.S. economy wasn’t likely to continue doing so well forever.
“Their (cattle feeders’) only chance of mitigating loss is to buy cheap feeder cattle and hope we’re out of this in six months. They are motivated to move cattle now so they can buy some cheaper cattle,” he said. And while feeder cattle prices are valued below breakeven for backgrounders and ranchers, they still aren’t low enough for the cattle feeder to buy them and make a profit in the current market environment, Crosby said.
Many feeders were expecting a strong market through the spring because numbers were down slightly in January and February, due to feeder cattle not selling during the Holcomb, Kan., fire market crash. “Those cattle would have normally come out in January and February and they had been pushed off,” he said. Crosby said those smaller numbers should have given feeders the chance to hedge well but the pandemic scare took that opportunity away.
Illness in Asia created concerns over the export market, initially pressuring down the cattle market in January, Crosby said. “Hong Kong, Japan and South Korea buy more U.S. beef than the rest of the world combined,” he said. However, when looking at the data, Asian exports were 20 percent higher than the year before, year to date.
Crosby explains that hedged cattle lost less, but the fact that some are hedged and some aren’t, can exacerbate market downturns.
“Packers understand that as long as they bid enough higher than the futures that they are giving an incentive for anyone who is hedged to take a bid,” he said. “What happens is you have just enough people who are hedged just enough that are willing to let go, and accept a bid from the packers. And then that kind of forces everyone else to take that same price.”
And essentially nobody is hedged 100 percent, because they want to maintain the opportunity to make money in an up market, too, he explained.
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AVOIDING LIQUIDATION ...
Pandemic Deepens Crisis for Ranchers, Cattle Farmers
Public News Service
Mar 24, 2020
BILLINGS, Mont. -- Already facing issues in the marketplace, ranchers and cattle farmers also are getting hit by the COVID-19 outbreak.
Billings-based group R-CALF USA, which represents independent cattle producers, is speaking with members of Congress and has sent an emergency letter to President Donald Trump urging measures that will do more than just keep their industry afloat.
R-CALF CEO Bill Bullard said the group has seen depressed prices for years and now wants to see meaningful reforms rather than bail-out money.
"Congress is not yet focused on the real problem," Bullard said. "Instead, they're merely trying to address the symptoms of the problem. And we think that that is a misguided approach to this prolonged crisis."
Bullard said the novel coronavirus crisis could be an opportunity to implement what R-CALF sees as the best policy change for improving cattle farmers' situation: restoring mandatory country-of-origin labeling.
Last week, R-CALF sent a letter to Trump outlining five emergency stopgap measures for cattle producers. Bullard said among them is asking Congress to streamline the ability for state-inspected beef packing plants to ship beef across state lines, especially as meat becomes scarce on some grocery store shelves...
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