As beef demand has been strong, both domestically and in the export market, ranchers and feedyards are struggling to find strength in the fed cattle market. While the choice cutout reached $324.18 this week and packer profits have surged, the fed cattle price has not lifted in the same manner, leaving feedyards frustrated. While packers see profits between $900 and $1000 per head, feedyards are finally seeing a profit, although it’s shy of $100 per head.
During the week of May 10th, NCBA, R-CALF, U.S. Cattlemen’s Association, American Farm Bureau, U.S. National Farmers Union, and the Livestock Marketing Association met in Phoenix to discuss possible producer-led solutions to the detachment of the fed cattle price from boxed beef prices.
Traditionally, this collection of organizations has not been on the same page for many issues, which is why many in the agricultural sector have called the meeting “historic” and “unprecedented.”
“It’s a red-line level of frustration,” said Colin Woodall, chief executive officer of the National Cattlemen’s Beef Association to Bloomberg.
Drovers reported shortly after the meeting that the groups might have a joint statement providing a suggested course of action.
Lawmakers in the U.S. have also been taking notice of beef producer concerns. Senators Jon Tester (D-MT) and Chuck Grassley (R-IA) have initiated 50-14, which would mean for those that slaughter over 125,000 head of cattle each year, must purchase 50 per cent of their weekly volume of beef slaughter in the open or “spot” market. Furthermore, these animals would need to be processed within 14 days.
On May 20th, Senator Mike Rounds (R-SD) appeared on AgriTalk and stated “we need to broaden the number of individuals that are interested and concerned about what is going on in the meat packing industry. The money is not getting back to the cow calf operator or feeder, somewhere in the middle that money is disappearing.”
Bloomberg reported on Thursday that the Biden administration views the pricing patterns in beef processing as evidence that concentration is having damaging effects on the supply chain and rural America, a senior U.S. Department of Agriculture official said, on condition of anonymity.
Many believe that one of the solutions is programming and legislation to increase the amount of smaller regional packers, to increase competition in the cash market. Lyndsey Smith of RealAgriculture stated on RealAg Radio on Friday May 21st, “we like the open market and transparency but at the same time with consolidation and the power in the hands of a handful of packers, the rest of the industry does not have a lot of leverage in this case.”
In a potentially related matter, due to timing, JBS has decided to leave NCBA as reported by Agri-Pulse.
On Friday May 21st, on the AgriTalk Free For All, the panel (which includes myself) discussed the beef group meeting and how solutions are complicated, which has created a tug of war between swift action or deeper analysis to avoid unintended consequences.
Listen in to the AgriTalk Free For All segment, below: