Interview with Brad Kooima, Commodities Broker at Kooima Kooima Varilek Trading Inc., Rock Valley, IA.
Q: What do you feel are the major issues standing in the way of fair cattle markets?
The first issue standing in the way of fair cattle markets is the un-level playing field between formula traders and negotiated cash traders. The formula traders are making the profits while the negotiated traders are doing all the work. On top of that, formula traders are being rewarded for quantity instead of quality.
Q: What solutions need to be implemented in order to overcome these issues?
We need increased packing capacity or more packers, however that is a steep hill to climb that will require millions upon millions of dollars.
Another option is the 50/14 legislation brought forward by Senator Chuck Grassley. This bill would make the packers compete in the marketplace.
Q: Do you think the beef industry is in danger of pricing itself out of a product if retail beef prices don’t return to pre-Covid-19 levels?
Yes, if we continue to stay at this disproportionate value much longer, we’ll not only make inroads at the retail level, but we’ll also start to see the hotel-restaurant industry back way off.
Q: Do you have any thoughts on the backlog of cattle that the industry is facing? A projection on how many cattle are actually out there?
The industry was very current when Covid-19 began and the amount of northern yearlings on feed was less than reported. The combination of a smaller yearling number and the industry being incredibly current would put the backlog of cattle somewhere between 700,000-800,000 hd. The long and short of this situation is that we won’t be getting through this slog of backlogged cattle anytime soon, it’s going to be a long summer working through these cattle.
Q: What do you see happening to the American cattle producer if substantial changes aren’t made to achieve fair cattle markets?
If we don’t do something to fix this mess, the cattle industry will become vertically integrated just like we’ve seen in the pork and poultry industries.
Q: As of today, the cattle markets are not fundamentally supported. When do you think we’ll see our markets take a downward turn?
The concern is that the packer could basically bid as low as they please for cattle, and feeders would have no choice but to take those bids. But because we have all these eyes focused on the packing industry, there is a bit of unwillingness for them to take more advantage of the producer than they already are. It looks as if the packer has grown a conscious for a minute.
Q: Any closing statements?
Different organizations and associations have different particular interests that they care most about, but at this time when the industry is experiencing an all out crisis, one would think that everyone would be able to get on the same page and realize that something has to be done to give the small/medium independent cattle producers a competitive chance to compete.