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Cattle Market Outlook: Waiting And Hoping

cattle markets wait for warmer weather cattle price increase

Analogies are always useful to make sense of markets – especially when they’re challenging. Thus far, the market in 2013 has possessed similar inertia to what occurred in 2009 – prices just can’t seem to get any upside traction. Clearly, this is a very different time with different circumstances, but the pattern surrounding the market invokes some of the same sentiment of several years ago.

At the close of 2009, I described the required work ahead for the market as a job of “grinding it out.” And here’s where the analogy comes in: the business possessed a likeness to being, “in the hedge rows fighting our way out to some open ground.” That seems to fit for where we’ve been thus far in 2013.

The market’s performance has been both frustrating and disappointing. There’s been some sloppy trading and tough slogging on a weekly basis (Figure 1) patiently biding time for better cattle prices. But open ground continues to prove elusive, leaving cattle trade on the defensive at all levels.


weekly fed cattle prices

That’s been especially true through most of April in fed cattle. While April closed business on a positive note with the fed trade finishing the month at $128-9, that’s par with where cattle traded just over a year ago. Even more disappointing is that trade is sharply lower than where the April live cattle contract had marked trade as 2013 opened for business; recall that the contract began the year at $136 (thus the frustration and disappointment).

Choppiness and uncertainty isn’t unique to the beef complex. As noted in my column last month, many retail segments are experiencing a similar slowdown in spending. Consumer reticence is likely due to any number of factors, including inclement weather and higher payroll taxes. The flurry of earnings season reports in recent weeks from publicly traded companies has reflected a common theme: among many retailers, year-over-year results have been challenged because of the varying factors noted – especially weather.

All that said, last month’s column indicated the market seemingly had the potential to work higher. Warm weather would make a world of difference in terms of getting consumers out of the house; some hope of spring on the horizon would surely spark the market. No such luck.

That means lost opportunity during the past several weeks (more frustration and disappointment). While there’s likelihood of some pent-up demand that may provide a chance for a rally beyond Memorial Day, the window of opportunity is becoming increasingly narrow. Moreover, at this late date, duration of better prices will likely be short-lived only to be pressured by normal seasonality on the other side.

The drift away from higher highs thus far in 2013 largely stems from the inability of the wholesale market to get moving. The Choice cutout has remained relatively flat, chopping around $190 for a month now. Better prices at the feedyard won’t occur until there’s some better movement and upward price momentum in the boxed-beef market.


choice cutout beef prices

Signs of some better direction and/or firming sentiment in the short-run will largely hinge on performance of the middle meats (Figure 2). The round and chuck have largely carried the load the past six months or so. However, that’s beginning to rotate with some hope of warmer weather around the corner – that leads to both more featuring AND better restaurant traffic (the widening Choice/Select spread of late is also a positive sign). If that occurs, perhaps the wholesale market can get a shot in the arm and subsequently boost fed trade in May and June.

Frustration and disappointment about the market’s recent direction is probably greatest out in the country among those holding feeder cattle. All the factors discussed above have spilled back into the feeder market during the past several months. Meanwhile, given the large number of feedyard arrivals in March, it would appear that while feeder cattle supplies are tight, forage availability and feed supplies are even tighter.

Those factors in combination have seemingly turned leverage in the feeder market away from the seller toward the buyer. Softer prices on the buy side have substantially improved available margins in the swap and prospects for closeouts on the other side (Figures 3 and 4). That doesn’t ease the pain with current sales, but does improve the outlook for at least some semblance of relief in the feedyard sector’s current cash burn. It also speaks to the importance of risk management – some reversal at the CME will provide a great opportunity to protect deferred closeouts given the current buys.


cattle return prices
weekly crush cattle prices


To conclude, April has proven a sour month for the markets. There’s likely, though, some upside potential if and when weather gets back to normal. Either way, this year’s market underscores how challenging it is to navigate marketing decisions in the current business environment. So, as mentioned every month, reactive markets mandate the need to be vigilant about news, developments and estimates: remain informed and maintain objectivity around all aspects of the business.

cattle price summary


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Feeding Group Looks To Cattle Marketing Alternatives

cattle feeder group looks to get better cattle prices

Back in the late ’90s, as cattle feeders in Texas and Oklahoma looked at trends and dynamics in the fed cattle market, it was increasingly evident that formulas and forward contracts, and later grids, would forever change the way cattle would be marketed.

So, as the world left the 20th century behind and stepped bravely into the 21st, a group of independent cattle feeders joined together to form Consolidated Beef Producers (CBP). Designed as a marketing organization, the idea was to consolidate groups of fed cattle into volume lots, giving independent cattle feeders the negotiating leverage with packers to maximize price on the cash market. Since it was formed in 2000, CBP has grown to include nearly 200 cattle feeders in 15 states, with a total combined capacity of more than 4 million head.

In the ensuing 13 years, not only have those market dynamics continued, but other forces have come to the fore to affect the fed cattle market – ethanol, higher volatility, a shrinking cowherd and production technologies like beta agonists that shorten the marketing window.

To adapt to an ever-changing marketing environment, CBP leaders and staff recently developed a six-point strategic initiative, which they rolled out to members during their recent annual meeting. Those six points are:

1.    A customer needs assessment and communications plan. No business can be successful if it talks more than it listens, says Bruce Cobb, CBP general manager. “You have a lot of challenges and our goal is to help our group understand those challenges, then put together services and programs that address those needs and address those challenges to help you better compete in the marketplace,” he says.

A big part of that is open and aggressive communication between the CBP office in Canyon, TX, and its members, says Shelby Horn, with Great Plains Cattle Feeders in Hereford and incoming CBP chairman. While CBP does a good job already in communicating market information to its members, more can be done.

“We feel that trades happen within our membership that aren’t widely known,” Horn says. “We may make a basis trade at Great Plains, but everybody else may not know about that trade. We feel we need to do a better job communicating those things among our membership.”

2.    Develop new, innovative cattle marketing options. “Competition in the spot market is becoming less and less,” Cobb says. “So we have to find ways to go back to the initial concept of CBP creating competition in the marketplace and find new ways to do it.”

However, CBP doesn’t plan on turning any cattle over to a packer that are unpriced at time of sale. “If we’re determined to sell cash at all costs on the spot market, I think we’re in a formula to not succeed,” Horn says. “So our strategy is to try to create competition from a packer at an earlier day (out-front sales) but make sure the cattle are priced and negotiated.”

3.    Develop a comprehensive risk management system. “One of the things CBP has identified is a comprehensive risk management system to go along with some of the other systems we have,” Horn says. “That system will be designed to help members tract hedging and evaluate risk.”

However, CBP doesn’t intend to get into the futures brokerage business, he says. The system will simply allow members to keep track of their risk management positions and help them quantify their market risk.

“It’s pretty difficult to separate cash marketing and risk management. Whether any of us like it or not, the futures market basically prices our cattle,” Horn says. And, adds Cobb, with the velocity and volatility that characterizes futures markets, being able to better understand risk is essential.

4.    Develop a comprehensive plan for CBP story beef. “Probably one of the least-capitalized advantages we have as independent cattle producers is telling our story,” Horn says. “Research continues to show that consumers want to know who is producing their food. And as independent cattle producers, we have a great advantage in that effort.”

Cobb agrees. “Consumers have a natural trust with producers. It’s the greatest unutilized and unleveraged asset in our industry today and has been for years. And I believe there’s an opportunity for us to begin tapping into that asset and leveraging it.”

Several years ago, CBP explored the possibility of developing its own “story beef” – that is, beef products with a background story to them. “We had an obstacle that we just couldn’t get through, so we set it on the shelf and waited for another day. I think that day is here,” Cobb says.

5.    Explore opportunities to expand into eastern Nebraska and Iowa. While CBP has members in 15 states, it is strongest in the High Plains. “The area we’re lacking in is eastern Nebraska and Iowa,” Horn says.

Expanding CBP’s membership base into that region would benefit everyone, he says, because of the market intelligence it would create. “One of the key benefits I see with CBP is the coverage we have in the cattle market in all areas. We know what’s going on in western Nebraska; we know what’s going on in Kansas; we know what’s going on in Texas. And to be able to have one entity to assimilate that market intelligence for us as producers, having a presence in eastern Nebraska and Iowa I think would enhance that.”

6.    Aggressively market As cow numbers shrink, sourcing feeder cattle is becoming a greater challenge for cattle feeders. To help its members, CBP launched earlier this year.

It’s a lot like, Cobb says. A member can put in the various criteria it wants in feeder cattle, then the site searches its database and delivers listings that match. “So we’re in the process of setting up some relationships to get it populated with cattle,” Cobb says.

CBP staff and leadership will now go to its membership to hear their opinions and ideas on the strategic plan. Horn is hopeful the independent cattle feeders who constitute CBP’s base will see its value. “I think CBP needs to make a big step,” he says. “I think we’re at a point in our marketing where it’s important for us to look at all our opportunities. I think it’s going to require us to do that if we’re going to remain viable as independent cattle producers.”


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Is Hay Nutrient Removal Still An Underrated Cost?

It's getting more common for people to adamantly feed hay back on the ground from which they cut it, or to buy hay and consider it part of their fertility program.

That's because the amount of soil nutrients carried off in a hay crop is shockingly large. Rocky Lemus, Mississippi State University forage specialist, says experience tells him this is less understood in the southeastern U.S. Lemus also has forage experience in Iowa, Texas, Virginia and Ohio.

He says he always found dairy producers to be very knowledgeable about the nutrient level of forages they purchase, but not as much for beef producers. This lack of knowledge hurts beef producers in two ways.

First, they may be making bad purchases in a very expensive hay market, or they may be putting up low-quality hay, which is still an expensive input.

Second, the lack of proper fertilizer management hurts plant nutrient uptake and efficiency.

"In Mississippi, it's not uncommon for farmers to just put on some nitrogen or triple 17 without really knowing what is the optimum pH and what their soils need," he says. "Sometimes they complain about the cost of a soil test, which is $6/sample, but we often see them spending $500 on fertilizer they don't need."

In Mississippi, Lemus says each ton of bermudagrass hay removes about 46 lbs. of nitrogen, 12 lbs. of phosphate (P2O5), and 35 lbs. of potash (K2O).

To read the entire article, click here.


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Top 3 Lessons We Should Learn From The Previous Generation

multi generational ranch

One fun fact about me is that I enjoy genealogy. Perhaps it’s the journalist in me, but I find it thrilling to investigate and learn about my origins – people and places. With just a little digging, I can learn more than just names and addresses; I learn stories. For example, I have a great-great aunt who was run over and killed by a covered wagon.

Such personal stories -- both triumphant and tragic – carry interesting and important lessons. And whether it’s a living relative or a generation gone by, I believe there are several important lessons we can learn from our elders that we can apply to modern times in agriculture. Here are three lessons I have learned from previous generations. 

1. Record-keeping helps keep you on track. I’m a notoriously poor bookkeeper. Admittedly, I have a bad habit of stacking up receipts, invoices and expenses in a big pile for my husband to sort out. But, by keeping track of these items, we can budget, plan for the future and make better decisions on everything from running a household to making breeding decisions on the cattle. 

My great grandparents, LeRoy and Francis – both deceased, were married in 1936. Shortly after they exchanged “I do’s,” they purchased a farm, but locked the doors and headed west for a six-month honeymoon, where they worked along the coast in odd jobs. It was an adventure, and I’m lucky they documented everything in diaries they both kept throughout their lifetimes. Through their diaries, I can see that in 1936, a gallon of gas cost 25¢; a loaf of bread 13¢; a night in a cabin $1; a box of matches 5¢; a hair cut 25¢; and a block of butter 45¢.

I can tell from looking through their records that they kept close tabs on how much money was coming and going. Even though they were working odd jobs, they managed to be gone from the farm for six months and come home with a little bit of cash to start their life in South Dakota. Slowly but surely, they grew their farm and their family. But, it was careful record-keeping in their modest beginnings that allowed them to get their start. Whether managing a large ranch or the household, documenting expenses and income provides a guide for success.

2. Don’t get in over your head. When my grandparents, Alvin and Devona, bought the farm I currently live on, their friends, neighbors and banker told them they would never make it. But, Grandpa was smart. He made sacrifices along the way. He put half-down on the ranch and paid the rest of the bank note within three years of purchase. He was wary of being in debt, and has always told me that if he didn’t have the money on hand to buy something, he wouldn’t buy it. He made smart decisions to manage the risk of purchasing his operation, but he also didn’t get in over his head. He had a plan and was willing to work with old machinery, eschewing the shiny toys and cars his friends had, to achieve his goals. Today, he can be proud of what he's achieved. His willingness to work hard and be smart with his money paid off for him and his family.


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Today, it can be extremely difficult to be in the cattle business without an operating note, land loan, equipment loan, mortgage, truck payments, etc. It seems my generation, myself included, is impatient to acquire what our parents and grandparents worked their lifetimes to build. All too often, I see couples my age getting in over their heads and falling short on their payments. I’ve learned to set realistic goals and pace myself to get there. I have a lifetime to achieve the goals I've set, and I’m willing to work hard and make sacrifices to get there. And, if it means I drive a rusty tractor instead of a brand new one, then so be it. I’m doing what I love to do, and I’m not in a race to get there.

3. Make family memories. My great grandpa was an only child. He went on to have six children, 17 grandchildren, 37 great grandchildren and seven great great grandchildren, with two more on the way. He not only loved the land and the livestock, but he loved his family, too, and he and my great grandmother spent their lifetimes teaching the next generations important lessons -- how to drive a tractor, plant a garden, sew, can fruits and vegetables, freeze sweet corn and spend time together.

One of my grandpa Arnold's fondest memories is going on an overnight fishing trip. It was one of his fondest memories with his father, and he vowed to spend time and make memories with his family, too. So, the big bunch of us gets together often -- whether it’s a cattle sale, boating at the lake, or exchanging gifts at Christmas, family makes it all worthwhile. You can work all day, but it’s important to remember who you are working for. The next generation is your real legacy; make time for them and make memories.

What are the most important lessons you have learned from older generations? What lessons do you want to pass onto the next generation? Share your best stories, memories and words of advice in the comments section below.


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Will Genetically Engineered Food Feed A Hungry World?

genetically modified food

Dick Tracy was right. So was Captain James T. Kirk and Maxwell Smart. Through their characters, they showed the world what could be possible with technology. And what was once considered pure science fiction is now a daily reality.

It makes one wonder if ol’ Dick enjoyed his breakfast cereal made with genetically engineered (GE) corn while talking into his wristwatch.

Indeed, while technology has overwhelmed the world in many ways, society has cast a leery eye toward advances in food production. And that, says Alison Van Eenennaam, University of California-Davis Extension animal genomics and biotechnology specialist, is hampering agriculture’s ability to feed an increasingly hungry world.

This societal angst toward agricultural technology has produced a political and regulatory environment that makes it nearly impossible to gain approval for GE products. For example, she turns to the long road traveled by a company trying to gain approval for an Atlantic salmon designed to reach market weight in about half the time as its wild counterparts.

However, after 25 years and $60 million, the company is still trying to gain approval. “And basically this has had a prohibitory effect on anybody investing in this technology,” Van Eenennaam told those attending the National Institute for Animal Agriculture’s recent annual conference in Louisville, KY. “I don’t know of a company that could cope with that sort of regulatory uncertainty and cost to bring a product to market.”

It’s not that past experience shows any safety concern. “We had our first GE crop go to the market in 1986,” she says. “Last year, 17.3 million farmers made the choice to plant GE crops. They were grown on more than 170 million hectares (420 million acres). About 90% were poor-resource farmers in developing countries. We and our livestock have consumed billions of meals and there hasn’t been one documented case of the GE nature of the material consumed causing safety or health problems.”

Van Eenennaam doesn’t argue that safety evaluations of new, novel traits shouldn’t be done, “Especially when bringing in a protein that hasn’t been eaten before.” But her question is this: is singling out GE products for excessively intensive and rigorous approval really in line with the level of risk?


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As a result of the overly hostile political and regulatory environment that agricultural biotechnology faces in the U.S., research and development of GE foods has migrated from the U.S. to countries with less prohibitory regulatory environments, like China and South America. China particularly is growing its ability to produce GE foods, with the government investing heavily in developing such plants and animals.

Given the oft-quoted figure of a global population of more than 9 billion people by 2050, up from the current population of roughly 6 billion, many believe that agricultural biotechnology is one of the leading ways that farmers worldwide will be able to produce sufficient food. But only if it’s allowed to be used.

“In a world where we’re going to have demand to feed those people, I just don’t think we can have this absolutely precautionary, prohibitively expensive, time-consuming, uncertain regulatory approach to GE plants and animals,” Van Eenennaam says.


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