This week's essay, plus today's daily blurb, is worthy of full inclusion...
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The JBS Greeley plant joined a Smithfield SD pork plant and a couple of smaller beef and pork plants to close. Tracking the plant slowdowns is more difficult. The JBS plant is set to reopen next week on April 24th. The other closed plants have no firm reopening dates but are temporarily closed. The only reliable gauge of damage to slaughter volumes is the USDA daily slaughter report where volumes are compared to prior week and year.
Government officials are rushing to deliver virus testing kits to meat plants. Many workers are reluctant to go to work for fear of infection. Moreover, union officials are presenting another pressure point as they negotiate with the processing companies. Local health departments are joined with state and national health representatives overseeing the safety of the plant workers. The key to restoring normal volumes in the beef plants is the same requirement for reopening the economy --- testing, testing, testing.
The issues are similar at almost all meat processing plants across the nation. The objective is to keep plants open and operating at near capacity. The requirement is providing a safe workplace free of the coronavirus. Maintaining the food supply chain for supermarkets is especially important because of restaurant shutdowns.
The plant shutdowns and slowdowns will pressure all points in the beef pipeline. Feedlots will struggle to find kill slots. The cattle offered in the cash market will find few buyers. Feedlot purchases of replacement cattle will be placed on hold and cattle on pasture will stay a little longer. Planning and reshuffling of schedules will be on everyone front burner. This emergency will have a short shelf life and solutions will be rapid in development.
Processing plants are a natural environment for a virus hotspot. The remedy is testing and recruiting. The available job seeker pool is large. Retraining takes time but in days and not weeks. Many absent workers are ready to return when they believe the workplace is safe. In the meantime, some fabrication work can be passed along down the line to the supermarkets.
Cattle traded this past week at mostly 105 to $106 live and $168 dressed. Late sales moved higher to $106 in Nebraska. Asking prices will be higher this week.
Cattle Futures. Live cattle futures closed up three dollars. There are market moving developments constantly in the marketplace. Few of those developments are released by any unified source and often industry participants find out about market moving news after the fact. Chances are good if futures move up or down the limit on any given day, there is something driving the direction.
You might be a health official who has become aware of a hotspot in a beef plant of infections or you may be a union officer who is negotiating a plant closure or reopening. Or you might be a supermarket executive finding a gap in the supply chain. All of these pieces of information are not insider information, but in the right hands, are market moving. Sometimes industry participants become puppet players in a staged play they are not even aware is taking place.
The recent volatility in futures prices has seen a record number of days when futures have either been locked limit up or limit down. Periods of uncertainty have always plagued the commodity markets but the recent coronavirus crisis has outstripped any previous market moves.
Forward Cattle Contracts: The price decline in the futures market has slowed forward contracting of fed cattle. Only a trickle of cattle are sold for forward delivery.
The Cutout. This past week's slaughter of 536,000 head was well under prior week and year and this week will be lower still. Box prices are moving higher as fears of shortages mount.
Beef Feature Activity Index. Retailers are struggling to make firm plans for protein offerings in the nation's meat counters. Eating at home changes the demand for certain cuts of beef. The end meats along with hamburger find healthy demand while the middle meats struggle to find an outlet until the outdoor grilling season starts next month.
Replacement markets
The beef pipeline is designed to give price signals at every transfer of ownership point. Apart from weather, these price signals govern the flow of cattle through the pipeline and indicate when the nation herd needs to grow or shrink. The price points also serve another important role of stabilizing the price of beef in stores and restaurants. Erratic and volatile price moves turn off consumers and make meat dealers nervous. The recent market moves stress those handling cattle but they also threaten an even flow of cattle throughout the beef pipeline.
Many cattle will be forced off pasture in May. May is normally the end of the winter grazing season across the southern plains and in the south. Winter grain fields mature and grazing ends. The bunched up groups of cattle that have not moved in March and April, have been pushed to May but few people are able to hold them past.
Lender woes are transferred to cattle owners as large changes in the borrowing base or inventories of cattle stress the equity base of the industry. Cattle financing is always important to cattle owners and some breeders and stocker operators are evaluating retain ownership options into the feedlot. Rather than accept distressed prices for replacement cattle, some will choose to feed the cattle. Unfortunately, they will be faced with cautious lenders who already are plagued with cattle loans with inadequate margins and large losses. Even feedyards that always provide financing are growing cautious both in evaluating the value of the cattle coming into the yard and establishing monitoring of their value on a weekly or monthly basis.
Finding a price point for transfers of cattle ownership is become a task fraught with peril. The traditional bicker of trading in .50 increments is quickly becoming replaced with prices that can vary $5-10 in a day. Some feeder cattle auction markets last week reported prices $15-28 lower. Navigating through this type volatility is nerve racking on both the buy side and the sell side.
Small business loans, that can be forgiven, are being funded daily and allow qualified beef producers to participate. BOC Bank in Amarillo, Texas has streamlined the application and funding process making everything available online. Click on the link.
Oklahoma City. Receipts were half of last year. Prices were $3-5 lower.
Feeder Cattle Futures. Feeder futures opened down the permissible limit.
Feeder Cattle Cash Index. The index is tracking the moves down in cash prices.
Forward cattle contracting. Forward selling has slowed or stopped as buyers and sellers evaluate market conditions.
Grain Futures. @TraDaToR Corn prices have flattened out. The size of this year's plantings will be closely watch as will planned use by the protein providers of the nation. The corn basis is weakening at 60 over the May board in Guymon, Oklahoma. Corn is now pricing into ration at $7.25 cwt. in the Oklahoma Panhandle.
GETTING BY WITH A LITTLE HELP FROM MY FRIENDS
The beef industry has always prided itself by remaining free from government help and subsidies. For the most part this has been true, even though cattle owners purchase grain kept low by government support programs. The stressors to the live sector of the business from the Coronavirus has imperiled many of the operations across the country. The past two years has included the Chinese trade wars, the Tyson fire and now the pandemic of COVID-19.
Multiple payments to farmers and pork producers during the Chinese trade wars helped defray the low prices for our farm products. The beef producers were left out of these programs. The live sector of the beef industry is now faced with marketing cattle in the immediate future at 40% discount to pre-virus price levels. The processing plants are impaired and operating a diminished capacities or not at all.
The damage is not uniform across the industry. Processors prior to the plant problems have held on to hefty margins at the beef plants. Many of the large feeding companies run fully hedged programs and any hedged operations are receiving windfalls with the large positive cash basis. Hedged operations are not the enemy and their successful choice of operating modes provides stability to the industry.
Within the unhedged portion of the industry, there is much financial pain and some operations are threatened with shut down. There are many differing business plans but all unhedged operations are suffering. Some operations hedge sometimes and some hedge a certain portion of inventory. Some jump in and out of the market trying to guess the highs and lows of prices. Others simply use price averaging and purchase cattle year-round taking the highs and lows into inventory. There is no correct way and each model must fit into a risk parameter for that operation.
There are rumors across the internet of help on the way coming from the President and the cattle associations. For those with unprotected inventory and a June futures board in the mid 80s and headed south, the looming threat of financial damage is large. Unemployment numbers jumping into the double digits and pose a serious threat to demand for beef but layered on top of that, the shutdown and slowdown from the processing plants, and you have a disaster.
The current crisis is certainly a calamity akin to a hurricane and our country has always provided assistance to “act of God” events that befall parts of the economy. Judging who to help, and how to help, is not easy business. Even after agreeing to include a certain class into an assistance program, administering the program is difficult. People always stand ready to defraud the government by gaming the programs. Moreover, auditing the records of each operation to prevent duplication or fraud would be a challenge.
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The JBS Greeley plant joined a Smithfield SD pork plant and a couple of smaller beef and pork plants to close. Tracking the plant slowdowns is more difficult. The JBS plant is set to reopen next week on April 24th. The other closed plants have no firm reopening dates but are temporarily closed. The only reliable gauge of damage to slaughter volumes is the USDA daily slaughter report where volumes are compared to prior week and year.
Government officials are rushing to deliver virus testing kits to meat plants. Many workers are reluctant to go to work for fear of infection. Moreover, union officials are presenting another pressure point as they negotiate with the processing companies. Local health departments are joined with state and national health representatives overseeing the safety of the plant workers. The key to restoring normal volumes in the beef plants is the same requirement for reopening the economy --- testing, testing, testing.
The issues are similar at almost all meat processing plants across the nation. The objective is to keep plants open and operating at near capacity. The requirement is providing a safe workplace free of the coronavirus. Maintaining the food supply chain for supermarkets is especially important because of restaurant shutdowns.
The plant shutdowns and slowdowns will pressure all points in the beef pipeline. Feedlots will struggle to find kill slots. The cattle offered in the cash market will find few buyers. Feedlot purchases of replacement cattle will be placed on hold and cattle on pasture will stay a little longer. Planning and reshuffling of schedules will be on everyone front burner. This emergency will have a short shelf life and solutions will be rapid in development.
Processing plants are a natural environment for a virus hotspot. The remedy is testing and recruiting. The available job seeker pool is large. Retraining takes time but in days and not weeks. Many absent workers are ready to return when they believe the workplace is safe. In the meantime, some fabrication work can be passed along down the line to the supermarkets.
Cattle traded this past week at mostly 105 to $106 live and $168 dressed. Late sales moved higher to $106 in Nebraska. Asking prices will be higher this week.
Cattle Futures. Live cattle futures closed up three dollars. There are market moving developments constantly in the marketplace. Few of those developments are released by any unified source and often industry participants find out about market moving news after the fact. Chances are good if futures move up or down the limit on any given day, there is something driving the direction.
You might be a health official who has become aware of a hotspot in a beef plant of infections or you may be a union officer who is negotiating a plant closure or reopening. Or you might be a supermarket executive finding a gap in the supply chain. All of these pieces of information are not insider information, but in the right hands, are market moving. Sometimes industry participants become puppet players in a staged play they are not even aware is taking place.
The recent volatility in futures prices has seen a record number of days when futures have either been locked limit up or limit down. Periods of uncertainty have always plagued the commodity markets but the recent coronavirus crisis has outstripped any previous market moves.
Forward Cattle Contracts: The price decline in the futures market has slowed forward contracting of fed cattle. Only a trickle of cattle are sold for forward delivery.
The Cutout. This past week's slaughter of 536,000 head was well under prior week and year and this week will be lower still. Box prices are moving higher as fears of shortages mount.
Beef Feature Activity Index. Retailers are struggling to make firm plans for protein offerings in the nation's meat counters. Eating at home changes the demand for certain cuts of beef. The end meats along with hamburger find healthy demand while the middle meats struggle to find an outlet until the outdoor grilling season starts next month.
Replacement markets
The beef pipeline is designed to give price signals at every transfer of ownership point. Apart from weather, these price signals govern the flow of cattle through the pipeline and indicate when the nation herd needs to grow or shrink. The price points also serve another important role of stabilizing the price of beef in stores and restaurants. Erratic and volatile price moves turn off consumers and make meat dealers nervous. The recent market moves stress those handling cattle but they also threaten an even flow of cattle throughout the beef pipeline.
Many cattle will be forced off pasture in May. May is normally the end of the winter grazing season across the southern plains and in the south. Winter grain fields mature and grazing ends. The bunched up groups of cattle that have not moved in March and April, have been pushed to May but few people are able to hold them past.
Lender woes are transferred to cattle owners as large changes in the borrowing base or inventories of cattle stress the equity base of the industry. Cattle financing is always important to cattle owners and some breeders and stocker operators are evaluating retain ownership options into the feedlot. Rather than accept distressed prices for replacement cattle, some will choose to feed the cattle. Unfortunately, they will be faced with cautious lenders who already are plagued with cattle loans with inadequate margins and large losses. Even feedyards that always provide financing are growing cautious both in evaluating the value of the cattle coming into the yard and establishing monitoring of their value on a weekly or monthly basis.
Finding a price point for transfers of cattle ownership is become a task fraught with peril. The traditional bicker of trading in .50 increments is quickly becoming replaced with prices that can vary $5-10 in a day. Some feeder cattle auction markets last week reported prices $15-28 lower. Navigating through this type volatility is nerve racking on both the buy side and the sell side.
Small business loans, that can be forgiven, are being funded daily and allow qualified beef producers to participate. BOC Bank in Amarillo, Texas has streamlined the application and funding process making everything available online. Click on the link.
Oklahoma City. Receipts were half of last year. Prices were $3-5 lower.
Feeder Cattle Futures. Feeder futures opened down the permissible limit.
Feeder Cattle Cash Index. The index is tracking the moves down in cash prices.
Forward cattle contracting. Forward selling has slowed or stopped as buyers and sellers evaluate market conditions.
Grain Futures. @TraDaToR Corn prices have flattened out. The size of this year's plantings will be closely watch as will planned use by the protein providers of the nation. The corn basis is weakening at 60 over the May board in Guymon, Oklahoma. Corn is now pricing into ration at $7.25 cwt. in the Oklahoma Panhandle.
GETTING BY WITH A LITTLE HELP FROM MY FRIENDS
The beef industry has always prided itself by remaining free from government help and subsidies. For the most part this has been true, even though cattle owners purchase grain kept low by government support programs. The stressors to the live sector of the business from the Coronavirus has imperiled many of the operations across the country. The past two years has included the Chinese trade wars, the Tyson fire and now the pandemic of COVID-19.
Multiple payments to farmers and pork producers during the Chinese trade wars helped defray the low prices for our farm products. The beef producers were left out of these programs. The live sector of the beef industry is now faced with marketing cattle in the immediate future at 40% discount to pre-virus price levels. The processing plants are impaired and operating a diminished capacities or not at all.
The damage is not uniform across the industry. Processors prior to the plant problems have held on to hefty margins at the beef plants. Many of the large feeding companies run fully hedged programs and any hedged operations are receiving windfalls with the large positive cash basis. Hedged operations are not the enemy and their successful choice of operating modes provides stability to the industry.
Within the unhedged portion of the industry, there is much financial pain and some operations are threatened with shut down. There are many differing business plans but all unhedged operations are suffering. Some operations hedge sometimes and some hedge a certain portion of inventory. Some jump in and out of the market trying to guess the highs and lows of prices. Others simply use price averaging and purchase cattle year-round taking the highs and lows into inventory. There is no correct way and each model must fit into a risk parameter for that operation.
There are rumors across the internet of help on the way coming from the President and the cattle associations. For those with unprotected inventory and a June futures board in the mid 80s and headed south, the looming threat of financial damage is large. Unemployment numbers jumping into the double digits and pose a serious threat to demand for beef but layered on top of that, the shutdown and slowdown from the processing plants, and you have a disaster.
The current crisis is certainly a calamity akin to a hurricane and our country has always provided assistance to “act of God” events that befall parts of the economy. Judging who to help, and how to help, is not easy business. Even after agreeing to include a certain class into an assistance program, administering the program is difficult. People always stand ready to defraud the government by gaming the programs. Moreover, auditing the records of each operation to prevent duplication or fraud would be a challenge.
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