Explosive Cattle Board! . . . .

[blackjack]

Or like my city cousins that complain about beef being to high yet will spend 200 bucks to go watch the flames. Hey guys food is cheap if you make it yourself compared if one pays for a service .As far I can remember that's always been the case.

[burnt]

Or like my city cousins that complain about beef being to high yet will spend 200 bucks to go watch the flames. Hey guys food is cheap if you make it yourself compared if one pays for a service .As far I can remember that's always been the case.

^^^ This.

Bought breakfast in town this morning for the first time in a while. 2 eggs, 2 slices thin soggy toast, 3 potato patties, 3 skinny sausages, coffee w/refill.

2 eggs, 40 cents. 2 slices toast, 25 cents. 3 patties, 45 cents. 3 sausages, $1.00. Coffee - 25 cents. Total food cost - $2.35.

Price of breakfast $8.65. plus tax. 1/4 for food, the rest for service/prep/tax. About typical for the story of food production.

Ten dollar bill for breakfast would leave a pretty small tip...and the diner isn't likely getting rich either.

[woodland]

We need more diversity in capacity: wishing Harmony Beef in Alberta all the success in the world.

I wish them luck too but the outcome of these plants haven't been great. We were involved in the cooperative plant that got built but never opened near Edmonton.

[Cattleman]

I agree the cattle industry faces challenges. We are not growing. But the ongoing complaining and ignoring market factors won't do anything to help. The industry is way too fast to get our backs up vs trying to find solutions. If consumers rather pay several hundred dollars on a new phone or the latest gadget, and don't want to spend $15 dollars on a steak, that's what we face. That is reality. Can we change it? Maybe... but i am not sure how.

Grassfarmer, the supply chain backed up. Why were carcass weights so massive? Producers were feeding cattle bigger and making more money...worked for a while and then it worked against them. Blame packers and retailers, but if they were making way more money selling pork, and the wholesale price of beef was at record levels relative to pork, we aren't going to be moving more beef at high prices! There was a problem moving beef at those price levels in that market. Exports dried up as well, and imports came flooding in. If you want to blame them for manipulation, that is up to you. At that point, in my mind, it was a market driven response. Market overshot the low, but it overshot the high. It has been doing that for centuries.

[grassfarmer]

On and on the excuses go - consumers won't buy our beef, producers making them too heavy, pork too cheap, exports drying up, imports flooding in all ignore the fact that there is plenty of money in the chain given where retail beef prices are - the problem is simple - the cattle producer is not getting an equitable fair share of the retail dollar. while those beyond the farm gate continue to take more and more of the pie.

From Rick Wright writing in the Manitoba Beef Producers magazine "....Those who follow the markets closely noted that the cash market has been constantly running dollars and dollars ahead of the futures. Even with the upward positive movement on the finished and feeder cattle futures prices, the futures were still running behind cash settlements. This just reinforces the fact that the futures have become disconnected from the real market and are no longer a reliable risk management tool"

How do you explain that one away Cattleman?

[Stampsguy]

Maybe that shows that the market is in Backwardation, and that their is strong demand right now. I'm no expert in the futures market but isn't this a good thing.

[Cattleman]

I presume you are fairly familiar with taking a live animal, and converting to how many pounds actually hit the store shelf, and what the actual product weight is? You know everyone's costs exactly to determine, that there is major abuse of primary beef producers? I explained fixed costs above. You choose to ignore it all.

Can't always explain the futures, as I said earlier. Remember 2011 to 2013 when futures were premium to cash? What was your complaints during those years? They saw lower supplies and were anticipating them. Futures now anticipating growing supplies of Red Meat. They may have a more negative scenario priced in, have to see how demand holds up at these prices. Exports are slow to respond to market prices, saw it in 2014, and late last year too. Futures may be understating that potential still.
The beauty of the futures market, is they have been a huge factor in the feedlot sector getting very current, and are reducing beef supplies. It has been a big signal to sell ahead. Yes it has been positive through this run. Hedgers have loved this futures structure through this last run, as they have made big bucks off the strong basis....But that probably shouldn't be Grassfarmer, as the hedgers are producers.... I must have something wrong that producers are actually benefiting from these manipulated markets.... Not sure what you really want me to explain, and not really sure it matters, as you have already made your mind made up no matter what I say, because you know for a fact everyone's ROI in the supply chain and the farmer is getting screwed.

[grassfarmer]

Cattleman or I should say Canadian Cattlemen's Association, if you look back in the thread you are the one claiming to know the costs of everyone in the chain not me.

I'll leave you with the report from Bluegrass Stockyards in Kentucky that I posted in my opening reply of this thread as it articulates the problems and highlights the concerns of the dysfunctional futures market. It might not interest the pimps for the processing and retailing sector but it will interest cattle producers as it is our future at stake.


"Today’s Cattle Market

A group of 40 concerned and heavily impacted cattle producers representing small cow/calf to large backgrounders met on October 11, 2016 at the farm of John Sparks to discuss the current situation with the cattle markets. Having seen prices for cattle decline from 40-60% in the last 14 months has created concern since the fundamentals of the marketplace would not indicate a drop of this magnitude is warranted. During this same period of time the retail value of the beef product has not fallen proportionally with the devaluation of live cattle. The consumer continues to pay an astronomical premium for the product while the farmer producing the product is operating below breakeven and has done so for two production seasons. The Packing and retail sectors are operating with historic profit margins that are well documented. Compounding this problem of too much control in the hands of a small sector of the industry is the fact that volatility in the futures market has created an environment that has crippled the cash marketplace.

Lenders require most if not all cattle customers to “hedge” their cattle purchases against the futures market. The extreme volatility in that market and the fact that it seems to move without any drive from fundamental market factors has taken all of the “risk takers” out of both the cash and futures market. We have seen several instances where the market has crashed, at the end of the week, when it is widely known that the packers need to go to the cash market to buy fed cattle to fill the next week’s harvest to supplement the 80% of the fed cattle supply that they already control. At other moments in the market there have been dramatic, often limit, moves that seem to be totally disconnected from the fundamentals at work in the cash marketplace and in the absence of any significant “news” in the industry that would justify those moves. In retrospect we now realize that the period in 2014-15 when the cash market ran up so dramatically was a predictor of what was coming, the market simply is not a vibrant and healthy fundamental marketplace in which legitimate business can be conducted.

This group is not proposing legislative solutions to these problems but rather asking that our elected officials initiate a round of questions to those responsible for operating and overseeing these markets. It seems that everyone, at all levels, acknowledges that we are at a pivotal time in the cattle industry and if the situation doesn’t change quickly we are at risk of allowing a forced integration of the cattle industry, similar to what transpired in the swine and poultry sectors. Cattlemen are fiercely independent and wish to remain that way. For three decades we have been told that the cattle industry cannot be integrated because the packer can’t afford to own the grass and cows. We now understand that they don’t have to own the resource base, they need only control the financing of cattle moving into feedyards and they accomplish the same level of control with much lower risk and cost.

The following is a list of agencies and entities and the appropriate questions that we feel necessary.

USDA – Justice Department – Federal Trade Commission
- In this environment of historic profit margins and an ample supply of cattle and excess processing capacity, why don’t the packers expand harvest as they would historically do?
- With the 4 major packers having achieved control of 80% of the fed cattle supply, either through direct ownership or contract production, is it time to revisit the rules under which the industry operates and limit the time that a packer can own/control that supply?
- Why won’t the packing industry consistently participate in the cash fed cattle market? The industry has tacitly granted them a monopoly, is it not their responsibility to honor that by maintaining a vibrant cash marketplace?
- There is virtually no price discovery in the fed cattle market. With only 20% of the supply traded in some form of open market or negotiated trade there is no way of knowing what the product is truly worth. How can we incentivize a higher percentage of the cattle to be traded in open markets?
- How can these agencies justify standing idle while packers make historic profits at the cost of family farms? Much of the equity that has been built over the last decade in the independent cattle industry has been eroded in the last year. Soon the farmer and farmer feeder will be forced to go to the packing industry for financing which is the same as integrated or contract production.
- The role of USDA is to insure open and competitive markets for farm commodities, what are they doing or planning to do in this situation?
- With a farm bill approaching, is it time to be proposing changes in the regulatory structure and rules that govern the packing and feeding industries?
Commodity Futures Trading Commission – Chicago Mercantile Exchange
- What is the origin of the volatility in the cattle futures contracts?
- Has the market been overtaken by electronic, high frequency traders or is it being manipulated by entities within our own industry?
- What has changed in the dynamics of this market since pit trading stopped and contract limits were expanded?
- Why can’t the traditional “long” trader participate in the current environment? They were the “risk taker” that kept the market vibrant for decades.
- What forces are at work that cause the markets to move independently of and often inversely to “fundamental news” in the industry?
- What drives the market to move sharply lower leading into times when packers need to buy fed cattle in the cash market?
- CME has openly stated that a vibrant cash market is required for a healthy futures market. How can the cattle futures continue to be relevant if the cash market is dysfunctional?
- What is the role of CME and CFTC in incentivizing participation in the cash fed cattle market?
- What steps are being taken to correct the dysfunctionality of the cattle futures trade?"

[errolanderson]

The June live cattle contract typically runs at a $7/cwt discount to the actual cash this time of year. The summer beef market doldrums (post BBQ buying) is now combined to realization of a much bigger red meat supply ahead. USDA feedlot placement data has has been bigger-than-expected and somewhat bearish.

Cattle traders know the market is in a temporary cash market squeeze. Cash cattle trading at $145 to $147/cwt this past week is extrodinary, while offering fantastic profit margins for the unhedged feeder. PNW packers are now sourcing cattle in western Canada. But our cattle are quite green. Alberta live cash equivalent may be above $1.90/lb.

The June contract was discounted $15/cwt plus because of this unusual market situation.in my view, this was more a cash market squeeze than a futures market squeeze. But the June rally did trigger significant margins calls for hedgers as well. Many cattle hedgers moved out of short futures into put options to reduce risk. This strategy maintained their price protection.

Monday morning, the CME has hiked margin requirements. This might force more liquidation for both the longs and shorts in the market. Extreme futures market volatility may last for a few more days . . . . .

[Cattleman]

Grassfarmer I don't have the data. I am not the one making definitive statements as if I did... From what I read, there is so many parts in a market that is crazy to think people have enough info to point fingers. When I started buying calves and having them custom fed, it changed my perspective quite a lot, in terms of how the industry and markets work. Can't even imagine what the packers and retail sectors really go through. But we all know they are bad, right? I was talking to a couple neighbours last year and when I said the feedlots were losing a pile of money last year, they just laughter and said good for them. Quite a screwed up perspective in my mind, to not want the next guy in the supply chain to make any money.

My only point was that complaining about things with out even considering the market factors going on, is not going to be helpful. Again markets go both ways. Producers are mad retail prices aren't coming down with beef.. Well they never went up nearly as much either, but that doesn't get mentioned.

The small traditional family farm has had it tough no doubt. I am one of them though. I have posted before how we don't have the fancy equipment, and our cows are scavengers for our forage enterprise. Started placing cattle partly for taxes, but have really enjoyed working those numbers, and that part of business. I am doing as well as I ever done with out a change in land base. Wish people would talk about solutions or things they control, much more productive. Instead of pointing fingers without even looking at the entire picture. There are some things that should have oversight, but do you think if they work on the list of things you outlined, it will save the family farm?