U.S. finds third possible BSE case

[cattleman2]

If there is so much money to be made, rkaiser and g_f, why are you not buying all the cattle you can and arbitriaging them into the USA for such a big premium. Good diversification of income for your farm, with very little downside using your math and logic.

Start talking to people that are actually exporting cattle south and you will find out what kind of a hassle it is, and what extra costs are involved. Do I think that it is a full $15/100 lbs - No, but it is certainly more than the normal 7-8.

Still goes back to the supply/demand issue that g_f doesn't believe works in the beef marketplace. Lakeside is now killing cows, therefore reducing the amount of live steers/hfrs killed, therefore increasing the amount on offer for other packers...stable pricing to what was before an open border. With Canada only export 7000 hd since the 18th that isn't even 1 days kill in Canada. How do you think that would increase the prices dramaticly? We need to be getting 15,000/week before we will see any real price increase from the locals, based on reduced numbers available.

CFIA/USDA rules are really cumbersome and time consuming until everyone gets the process down pat. going to take some time, as no-one wants to make an error now to give R-CALF or the US vet a chance to make a name for himself by sending a load back because of a document or animal error.

[grassfarmer]

Cattleman2, I think you misunderstand my post - I was pointing out that live cattle prices have not risen in Canada since the border opened. Nowhere did I mention that I expected them to be higher or that I was considering buying some and trying to make money shipping them south. I have never believed the "salvation" of the farm income crisis in Canada lay in once again exporting live fat cattle to the US. Indeed my post was me speculating that perhaps the new reality is for returns to Canadian producers to remain about the same as they have been with the rest of the money going into the hands of the shippers and US packers. Let's face it USDA, AMI and all the other interested parties south of the line that wanted to open the border were interested in making money at our expense not helping us out out of the kindness of their hearts.

I'm not sure what the "Still goes back to the supply/demand issue that g_f doesn't believe works in the beef marketplace" remark refers to.

[farmers_son]

Grassfarmer: Perhaps Cattleman2 was referring to comments I made to the effect that supply and demand are not working to fairly distribute the returns from the consumer to the producer.

And certainly when we see a $200 per head basis between the U.S. and Canada I think I am not far off the mark. I agree with Cattleman2 that the cost of jumping through the artificial non tariff barriers the U.S. has erected around BSE will not cost all of that $200.

Cattleman2 said “If there is so much money to be made, rkaiser and g_f, why are you not buying all the cattle you can and arbitriaging them into the USA for such a big premium. Good diversification of income for your farm, with very little downside using your math and logic.” I for one have stretched myself about as thin as I can just to keep the animals I have up to this point. No money left for arbitraging cattle into the USA. That game is reserved for players who got far more set aside money than I.

Although Cattleman2 questions my theory that supply and demand are not working here as they should, something is causing the basis to be $200 per head. Supposedly it is not the border being closed to live cattle any more. In an industry that reportedly lives and dies on $25 per fat calf you would think there would be more live cattle moving south. I am not in a position to speculate just what is the reason we do not see more cross border trade but I am sure the reason is interesting whatever it is.

[cattleman2]

Sorry g_f I meant f_s.

I actually believe that the supply/demand is working perfectly in the present moment. Lakeside has reduced their demand for red meat kill by killing cows, very few cattle are crossing the line (due to estremely cumbersome paper reporting requirements and authorizations required), therefore there is really the same amount of cattle to be killed in Canada, same amount of kill spaces...therefore the same pricing.

THe cattle that are crossing the line may be getting a higher price than what the locals are paying, but until the border crossing routine gets ironed out cattle will not cross in big enough numbers to "short" the Canadian packers to increase the price substantially.

[farmers_son]

Really… “Lakeside has reduced their demand for red meat kill by killing cows” What do cows produce, green meat? I agree that very few cattle are crossing the line, the question is why. Supply and demand, I think not. The supply and demand thing is a dead horse, everyone knows the market is not functioning, why pretend that it is. It looks to me like there is good money to be made here by doing a little paper work. The fact that more cattle have not crossed the line in spite of those profits tells me that something other than supply and demand is at work here.

[grassfarmer]

Perhaps there is a master plan at foot by the real players in the North American beef industry? IBP switch to only killing highly profitable cows leaving enough fed young cattle on the market to keep prices as low as possible in Canada - what's the downside for any of these players in this? worst case scenario a few fats get across the border live - to be killed by Cargill, IBP and a few by Swift. I don't see they can lose in either a closed or open border situationb with their current market domination.

[greybeard]

The border opening is like the curve in the road. No one wants to go full speed ahead until they can see what’s ahead. R-Calfers think the market will crash. We like to think it will rocket up. It will be somewhere between. Did we not see better prices on” speculation” that the border was about to open? When it becomes clear what the future holds for cross-border shipments the price will adjust accordingly.
Although the U.S. market is still dominated by few players, they don’t have the absolute control Cargill /Tyson enjoyed with the closed border. Hedging is also available to the feeders now. That should improve stability.
Unfortunately, I think we went though the high end of the cattle price cycle receiving record low prices.
If they own the cattle that they are shipping south, they are getting fair market value.
If they are shipping purchased cattle they are getting a risk premium.

[farmers_son]

Greybeard: You say “Did we not see better prices on” speculation” that the border was about to open?” Exactly so. Just prior to Judge Cebull granting R-Calf the preliminary injunction the rail price for steers was over $1.50 in Canada. The CME live cattle futures are at almost the exact same place today as they were on February 28 yet the ABP is quoting yesterdays rail price as $1.38 and the border is supposedly open in a manner of speaking. The dollars is 82 cents today and it was 81 cents end of February beginning of March but that only accounts for $15-20 per head. Why aren’t our cattle worth more than they were March 1 before the border “opened”?

It is encouraging to see that the CME did not react negatively to the announcement of another inconclusive BSE cow.

[blackjack]

...does the fat price in August not normally lower before going back up in the fall...while fat prices are usually at their highest in Feb and Mar...just wondering if that as something to do with the prices...

[farmers_son]

While there is a seasonality of prices for live cattle, what I am looking at is the basis or difference between what the U.S. producer is receiving for their fat steers and what the Canadian producer is receiving for their fat steers. It could be assumed that a narrow basis or small difference would indicate a more normally functioning market while a wide basis or greater difference is taken as a non functioning market, especially since the packers are selling our beef at near American prices and American beef comes into Canada and sells in our retail coolers.

This last Wednesday the Canadian producer was getting paid $200 less per fat calf than his American counterpart even though the border was supposedly “open”.

According to the Western Producer at least some of the live cattle that did cross into the United States were already owned by Americans. The actual number of cattle that have crossed into the U.S. will not be known for a couple of weeks when the U.S. publishes that information. Cattleman2 suggest the number is 7000, Canadian media talk about 5200. Either way it is a token amount. When the Canadian slaughter numbers come out for this week we will likely see Canadian Grade A slaughter numbers between 55,000 and 60,000 head, interestingly enough that is down from 65,000 a year ago even with our much talked about increased slaughter capacity. If those animals had been slaughtered on the U.S. side of the border they would have been worth collectively at least $6,000,000 more or put another way the markets are still not functioning normally. We cannot even pretend to believe that supply and demand are working to fairly distribute profits to the actual producer of the calf.

[blackjack]

...f_s...another good post...in reading your post I wonder if the feedlot guys are sizing up their options...according to Canfax most feedlots seem to be current with their supply...I will add since I background and sell yearlings in the summer market...I feel a whole lot better about the market than I did at this time last year...saying that I agree the system needs an overhaul...cannot imagine the packers wanting to give up the margins they have had for the last two years...

[cowman]

I might suggest ...wait awhile? Do you think...BAM.... the market opens and things are back to normal?
It takes awhile? The basic system can now,FINALLY, begin to function? Yep it will probably take a few months, but that's just how it is?
They'll get this crap solved and things will be back to normal?
We are in the process of getting things back to how they used to be and whether you think that is right or not, it will happen?
Yes, we will move back into a system that screws us...so what else is new?
Get used to it...that is just a fact of life...no one ever said it was going to be a rose garden?
No matter what, the world is one hell of a lot better place, for the producer, than pre- July 13th?