The Market Report

March 31, 2020

 

We have temporarily closed the small animal sale in order to keep within the guidelines our President has set forth.  We had initially planned on opening it before Easter as we thought that was going to begin the reopening of business as usual. However, the President has pushed back that date until the end of April, and we will do the same. The small animal sale brings about one hundred people each week and we think it’s in everyone’s best interest to not have that sale yet.

There is a lot of anxiety about the market as we get closer to selling our calves and yearlings. So here is some food for thought. The purchase of meat for home use has perhaps spiked as some have filled their freezers. That would explain the sharp drop in the live cattle futures since Friday. However, the consumer will continue to buy beef in the stores and that should support the market on fat cattle and cows through the end of the month. If we can get a hold of this virus by May 1st in most states and those people can go back to work, then I think there will be a big push by the restaurants to buy meat again. The people that have been staying home will welcome the opportunity to get out and eat a steak. So, we think we will have a demand curve like the one we have had in the stores. Nevertheless, we think it will have a little more life as people enjoy having the chance to move around. We also think that meat will stay in the freezer for the most part creating the largest frozen meet inventory anyone can remember. That will also be friendly to May/June fat cattle. These things are easier to see in the short term. The long-term markets will be dominated by things out of our control and/or our perception.

Let’s look at the markets down the road. The total supply of cattle continues to drop and that will surely be advantageous.  However, to start the year we had a 16% increase in exports. That meant vaccinations, age source, and program cattle were finally going to be king in the market. Today there is no way to determine if that is the course we will take when we finally get to selling these cattle off grass. Here’s my thought, EID tag them, vaccinate them in every way you can, then get them age and sourced by a third party. Is that a gamble with your money? The answer to that is yes of course. We wouldn’t be in the cattle business if we weren’t gamblers. So, here’s my thought, there will be premiums paid for NHTC cattle there will be premiums paid for Natural cattle. Just how many cattle it will take to fill that demand no one knows but I want you to have the chance. If I’m wrong, it won’t be the first time, but if I was even thinking about taking these steps, now would be the time.  I think any premium we can get on these cattle this year will be welcome income.

There is also something to be said for those that take the lead on vaccinations and program cattle. There is no doubt they will lead the markets in the future. If your cattle enter one of these programs there is an opportunity to get feedback on how your cattle have performed. Here are a couple of examples. Last year we sold one load of heifers for a customer into a natural program. The other load was for two customers combined to make up the second load. They had no implants and converted for 6.2 to 1 and 5.9 to 1 on a dry matter basis. The yield was 64.87 on one lot and 65.11 on the other lot. The lot that was a combination of producers and converted for 5.9 had fifty choice and seven primes at processing. Thirty-two qualified for certified Angus beef. The other lot had forty-three choice and twenty-one prime. There were thirty-two that qualified as certified Angus. We’re on top of following up on these cattle, especially when they fall into one of the programs.

I want to end by trying to explain again why the small businesses are so critical to this business and this country. I have talked a lot about the loss of the terminal markets and their value to all feeders because they established real market value for fat cattle. Last night I listened to a former Secretary of Energy talk about the loss of the independent oil companies in this huge drop in oil prices. There are literally hundreds of these companies we stand to lose in this collapse of oil prices. They think if something fails to happen soon then we might be left with five or six big oil companies running the entire oil business. That would be catastrophic for the American consumer but very similar to what has happened to the sale of fat cattle.

Well if we ignore the Livestock Markets when we have loads of cattle then we run the risk of the very same thing happening. Don’t let anyone fool you, we have been losing markets everywhere.  They are the backbone of price discovery in this business and they sell everything you produce. The video or internet isn’t cheaper to start with so support those that support you 365 days a year and keep the Livestock Markets and keep them working for you.

 

Jim Warren

831-320-3698