Q: What are the major issues standing in the way of fair cattle markets?
The CME cattle futures is a great tool for hedging, but the limits are too high, which makes the margins too high, which in turn makes it tough for producers to hedge. Instead, cattle producers end up doing packer contracting. These big swings in the futures are hurting the cattle markets.
The cattle industry needs a cash settlement in the fat futures to avoid such extremes like we’ve seen over the past couple months. If cash settlements were present in the fat cattle markets like they are in the feeder markets, producers wouldn’t have to resort to signing a packer contract.
Q: What solutions can be implemented to fix these issues?
The industry either needs to get enough producers behind the idea to change the CME, or a cattle organization like NCBA needs to get behind this idea and make some changes.
Q: Have you had issues over the last few months getting cattle moved that needed to be slaughtered?
Yes, and the packers more or less stole those cattle. The bids were way below what they should’ve been in comparison to what boxed beef was selling for.
Q: What are your thoughts on this backlog of cattle that the industry is facing?
The backlog has mostly been worked through. When the industry was working through cattle held back, our boxed beef was running at about 10 percent selects, and now we are right around 35 percent selects. These numbers show us that we’ve worked through the extra cattle. All too often in the industry, we’ll run into situations like this where they say a wall of cattle is coming, and they never show up.
Q: What’s your outlook for the market over the next 30-60 days?
The market will most likely grind higher, how high is anyone’s guess. By the time we get to October and November we’ll see the cattle markets quite a bit higher. The market will be supported going forward by a tighter supply of protein.
Q: Do you think we’ve done permanent damage to beef demand since consumers have been gouged over the past few months?
Damage has definitely occurred. This damage isn’t permanent, but it will take some time to recover. The retailers should be backing the price of beef off a bit for consumers here in the near future since boxed beef prices have been cut in half.
Q: Do you think our major cattle organizations can get on the same page and fight for similar goals?
They should be able to, considering they’re all working for the betterment of the cattle industry. One problem with this scenario is that everything NCBA implements to help our industry is usually helping the packer more than the cattle producer.