Explosive Cattle Board! . . . .

[woodland]

well somebody didn't like where the board was at. Does anybody else think our livestock insurance is a joke.

The prices you can lock in aren't bad this week but the cost is prohibitive. Over $8/cwt premium adds up quick on yearlings.

[blackjack]

woodland I was looking more at the calf insurance for dec.I feel the late summer grass yearlings will stay fairly strong.

[Cattleman]

It is a bit odd to see such a discount for December calf prices relative to October, I agree. Not really sure why the January feeder futures are such a discount. It is the feeder futures that drives calf coverage.

Overall the coverage is at pretty attractive levels overall. In addition to the cattle markets, a stronger dollar could take a bite of calf prices this fall

When I look at calf insurance premiums, I also ask myself, if I was the one selling the insurance, how much would I want to sell those options for, to guarantee the fall market will be above $2.30?

Cost is quite a bit, but the net coverage is well above what I thought I would be able to buy this year.

[grassfarmer]

The market is the market, it just seems, if the market goes screaming up, all is well, but if they crash they are rigged against producers. Yes, we can't always explain the market, and some fluctuations are suspect, but they tend to average out. Maybe producers didn't get full price for their calves last fall, but the calves they sold for over $3/lb, was probably too high, as feedlots lost hundreds of dollars on them. Take the average price of calves over the last 2 years, and feedlot profit and losses over the last 2 years it has averaged out pretty good. Prices are still very strong in my books. I rather focus on my business understanding the market environment I operate in, rather than point fingers at everyone else when things don't go my way.

A lot of confused thinking in there - typical "industry" talk - calves were probably too high, caused the feedlots to lose money etc etc. - prices are great we just have to keep our noses to the grindstone and turning out the calves and don't think about the overall picture.

This is the same BS Charlie Gracey is pushing - trying to get the cow/calf guy and the feedlot operator to share the money more equally while ignoring the fact that we are talking about fighting over the table scraps while those beyond the farmgate reap the real rewards.
The $3 calves were very sustainable as were the high fat prices attained at the same time - both ranchers and feedlots were making good money then so it is wrong to suggest that ranchers only made $3 because the feedlots were losing. We could be enjoying these higher prices all the time if packers/retailers were prepared to give back less than half the increase in spread they captured between 1995 and 2016 as illustrated by this graphic.



Do you not think we deserve a better reward Cattleman? I know one thing for sure the packers, retailers, paper traders and market analysts never have their income halved while they play games around our business and product. I just get tired of the status quo where the expectation is that the ranchers wife and in many cases the rancher himself have to work off farm as there are too many parasites feeding of the carcase of the beef business.

Blackjack the problem I see with price insurance is that it puts a ceiling on cattle prices. Everyone buying cattle now is using these tools - banks won't lend to them if they don't yet the formula for the price insurance is derived from futures. If you are able to "fix" the futures prices you are controlling the whole cattle pricing structure.

[Cattleman]

Yes, I am pretty darn happy with what I am getting. As I said, it is more than I planned for, and I have made very good profits with both the cows and cattle feeding over the last while. I don't expect cattle prices to continue to climb or stay record high, when hog prices are cut in half (although you will blame the packers and retailers for their woes as well). It slows down beef movement considerably when beef is extremely costly compared to other meats. So to say we could easily keep moving beef when it is way higher than the competition and offers poor margins relative to other meats it is not true. The supply chain is slow to react and it was these price relationships that was a big part of what culminated last fall.

Do you understand the fixed costs of the retailers and food service industry? Food service is having a hard time competing with the retail sector, because of their higher fixed and operating costs. Wholesale beef prices have dropped, from the highs, but still remain relatively high and retail prices have dropped some. They have passed on some of the lower costs to consumers, (and now beef is moving better and is why the industry is getting current) but of course their share of the beef dollar (as your chart shows) increases as the cost of beef has decreased relative to all of their other costs. Operating costs, with labour, and just keeping the lights on continue to increase faster than cattle prices. If you think the cattle industry can change the trend on these other costs, please let them know how. The reality is, that in your data, beef is a commodity, and whether it is beef, wheat, oil, lumber, real commodity prices are not keeping up. We would all like to say retailers could raise the price they pay for the raw commodity, but that is not how the markets work. Everyone squeezes costs. Walmart does it to all suppliers, not just beef. I know when I buy cattle, and look at the feeding margins, then I look at the commissions I pay, the trucking into and out of the feedlot, plus yardage the custom feedlot charges, these service costs are almost always way more than my profit margin, (at least when I initially buy the cattle). I hunt around, and try to squeeze costs, but they need to make money, or they won't be there the next time. Again, I can also choose not too buy the cattle.

I know you can have more complaints and say that cow-calf producers have to pay for all the leaches, and don't have control but if I really thought it was that unfair I would get rid of the cows. I choose to have cows. Unless you can change this theory of margin squeeze, then these are our reality. Yes, lots of guys have got rid of the cows, but that said North America beef production has not dropped much, and will grow for a couple more years yet.

To me the way around, the margin squeeze it through the niche markets and attribute marketing. But in my mind that is short term, as someone will be right there to compete with you, or you get into these crazy marketing campaigns that we are seeing today. Or as you have talked about, you can always do all the work yourself and do direct marketing. Always interesting to hear others long term solutions.

[westernvicki]

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

[grassfarmer]

It slows down beef movement considerably when beef is extremely costly compared to other meats. So to say we could easily keep moving beef when it is way higher than the competition and offers poor margins relative to other meats it is not true. The supply chain is slow to react and it was these price relationships that was a big part of what culminated last fall.

An interesting and correct analysis that rather proves my point. No mention of consumer backlash against higher prices because there really was none - the packer/retailer sector are not interested in selling beef if their margins are squeezed a little compared to what they can make in selling other meats. It wasn't so much the supply chain being slow to react (there you go blaming the cattle producer again) as it was market fixing shenanigans that brought about the catastrophic price collapse last fall that went against market fundamentals. Consumer demand remained strong, cattle supply remained short but the packers/retailers decided to collapse the price of live cattle because they can. That's the price we pay for having processing/retailing sectors with no worthwhile competition allowed by successive Governments.

That needs to change if we are to have anything other than a decaying and dwindling cattle herd and cattle sector going forward. It is simply unsustainable to have cattle producers get ever less of the retail dollar for decades on end, to have no new entrants able to afford land and cattle on the basis of market returns. I get tired of apologists for "the industry" I have a burning desire to see cattle producers get a fairer deal.

[Guest]

An interesting and correct analysis that rather proves my point. No mention of consumer backlash against higher prices because there really was none - the packer/retailer sector are not interested in selling beef if their margins are squeezed a little compared to what they can make in selling other meats. It wasn't so much the supply chain being slow to react (there you go blaming the cattle producer again) as it was market fixing shenanigans that brought about the catastrophic price collapse last fall that went against market fundamentals. Consumer demand remained strong, cattle supply remained short but the packers/retailers decided to collapse the price of live cattle because they can. That's the price we pay for having processing/retailing sectors with no worthwhile competition allowed by successive Governments.

That needs to change if we are to have anything other than a decaying and dwindling cattle herd and cattle sector going forward. It is simply unsustainable to have cattle producers get ever less of the retail dollar for decades on end, to have no new entrants able to afford land and cattle on the basis of market returns. I get tired of apologists for "the industry" I have a burning desire to see cattle producers get a fairer deal.

I agree , middle taking way to much , just like grain for very little risk or work . seems like it would be easier on the cattle side to do something about it like a coop packer . or something like that ?

[foragefarmer]

So many cow-calf guys exited the industry during the mad cow years and those that survived worked extremely hard to survive, as far as I'm concerned the ones still in it deserve these high prices and more. To me cow calf operations are the last major strong hold of the family farm. Grain farmland is being bought up by investors, where as hogs has become vertically integrated with very few family farm operators.

When we had a cow calf operation it was nothing but hard work to earn that dollar, glad we got out just before mad cow, more luck than brains.


Many great posts to read on this thread!!

[Guest]

I agree , they deserve whatever they can get , however I love beef but I won't pay $10 /lb for it . I love it , but I don't need it . to bad the packers have wrecked this industry same as grain co's doing to the family farm

[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?