Cattlemen, It's Time We Talk
By ShayLe Stewart, DTN/Progressive Farmer
If you were to ask a cattleman how he's weathered the coronavirus outbreak, he would take a deep breath, look down at his boots, look back at you and say with a hardened face and toughened eyes: "It's been utter hell."
In a time when fat cattle prices are expected to surge, prices are crumbling right before producers' eyes, and yet boxed beef prices have made historic leaps and bounds. The amount of volatility that has overtaken the marketplace is hard to grasp and has cattlemen in despair.
What's happened since the New Year is crippling, but what's happened in the last two weeks was completely unforeseen. To put things into perspective, it's important that you understand what's all changed.
From the first trading day of the New Year (1/2/2020), April live cattle have fallen from $126.47 to $91.85 (3/16/2020), equating to a $34.62 loss in 2 1/2 months. In the last two weeks alone, the April live cattle contract has fallen $18.30. On the feeder cattle side, since 1/2/2020, the April feeder cattle market has fallen $38.40, and in just the last two weeks, the market has fallen $26.95. The cash cattle market hasn't fared any better. During the first full week of January, fat cattle in the Northern Plains were trading for $200 dressed and cattle in the Southern Plains were trading at $124 live, and business didn't get underway until midafternoon on Friday. This week dressed cattle have been bought in the North for $168 to $175, and live cattle in the South have been bought for $105 to $110 where trade developed as early as Monday and Tuesday. Dressed cattle prices have fell $25 to $32, and live cattle prices have fallen $14 to $19.
While the futures contracts and cash markets dwindle, on Monday, boxed beef prices made history. Monday's advancements were the greatest jumps choice and select cuts have ever seen -- choice up $16.22, select up $14.73. Previously, the largest jump in one day for choice cutouts was $7.74 on Aug. 12, 2019, and the largest daily jump on select cuts was $5.79 on Jan. 4, 2016.
It's not unfathomable to imagine that, with consumers rapidly buying products, prices jumped. However, the problem lies in the fact that one side of the marketplace is seeing life-of-the-contract lows and a broken cash market, while the other side of the market is seeing all-time highs.
It would be naive to think this was all due to the coronavirus. The futures market may struggle with keeping natural longs in the marketplace, but feeder calves are a perfect example of "natural longs," and yet their presence isn't holding any equality. The market's fundamentals have been long gone in exchange for fear and hysteria as trade continues to develop and react with logic and sensibility being an afterthought.
When will it be enough? When will prices weaken to the point of developing a bottom and we start to see the market regain strength? That is potentially the most frightening question, because when fundamentals are replaced with emotion, volatility overcomes the sector and logical answers can't accurately articulate reactionary movements.
There are a couple of things that need to be on our minds moving forward...