Cattle feeders: Competing to sell cattle for the lowest price
- In February of 2013, fed cattle were trading at $125/cwt. and the choice boxed beef cutout was at $182.56/cwt.
- This week we’ve seen the choice boxed beef cutout reach $240/cwt. and cash prices paid to cattle feeders right around $114/cwt.
- On February 1, 2013, Cargill idled its Plainview, Texas, beef processing facility claiming that tight cattle supplies resulting from years of drought in Texas and Southern Plains states caused the closure.
- Cargill said in a statement that increased feed costs resulting from the prolonged drought, combined with herd liquidations by cattle ranchers, severely and adversely contributed to their challenging business conditions they were facing.
- When the closure happened, Len Steiner and Steve Meyer with CME Group Daily Livestock Report explained why it happened:
- Packers can live with slightly tighter margins when slaughter totals are large, but need higher margins when numbers are tight, according to Steiner and Meyer.
- Leading up to 2013, parker margins were not good.
- Beef packer margins were below the 2007-2011 average for almost all of 2012 and were far below those historical levels in the first quarter of 2012.
- From August 2012 going forward, beef margins were lower than the five-year average every week except for three.
- From the beginning of 2013 till when the plant closed, beef margins were lower than the five-year average every week.
- Net beef margins since August 2012 to February 2013, were deep in the red, said Steiner and Meyer. Coupled with prospects of lower cattle numbers through the rest of 2013, Cargill made the decision to close its Plainview, Texas, plant.
- So, when you look at the markets today, choice boxed beef is at $241.40/cwt. (Wednesday morning) and fed cattle at $114/cwt. Why compared to 2013 is the price for fed cattle 10 percent lower when beef is 25 percent higher? To answer that…
- Since Cargill closed its plant back in 2013, beef-processing capacity has not seen a substantial increase, while the U.S. cowherd has increased by 2 million head.
- Today, packers are running at full capacity and have found themselves in a profitable environment since they are able to restrict the amount of beef available to consumers and force cattle feeders to compete for the limited slaughter availability by bidding against each other to sell their cattle for the lowest price.
- Since Cargill closed its plant back in 2013, beef-processing capacity has not seen a substantial increase, while the U.S. cowherd has increased by 2 million head.
National Cattlemen’s Beef Association on the state of the industry
https://www.nationalbeefwire.com/national-cattlemen-s-beef-assn-on-the-state-of-the-industry
- During NCBA’s virtual Winter Reboot conference, NCBA CEO Colin Woodall and NCBA Vice President of Government Affairs Ethan Lane discussed the organization’s priority issues in Washington, D.C. and the state of the cattle industry.
- Lane and Woodall talked about the availability of USDA programs to assist farmers and ranchers who have been impacted by the frigid cold this month. They also touched on the impact that Covid-19 had on cattle markets and the work that NCBA is doing to deliver opportunities for increased profitability while also ensuring a steady food supply chain.
- The two NCBA leaders went on to share the many wins that the NCBA policy team has had such as ensuring the beef industry is eligible for pandemic relief programs.
- According to Lane, NCBA has a “robust relationship” with senior level leadership across various agencies in Washington, D.C., and those agencies are ready to listen to NCBA’s viewpoint.
- NCBA continues to ensure the beef industry’s success, stated Woodall. The cattle organization is doing what they do best and that is being the most effective advocate for cattlemen and women in Washington, D.C.
Pilgrim’s Pride pleads guilty to price fixing, sentenced to a $107 million criminal fine
- Pilgrim’s Pride has pleaded guilty to fixing prices and rigging bids for broiler chicken products and will pay approximately $107 million in criminal fines, according to the Department of Justice.
- From 2012 through at least 2017, Pilgrims took part in a conspiracy to suppress and eliminate competition for sales of broiler chicken products in the U.S.
- These actions affected at least $361 million in Pilgrims’ sales of broiler chicken products, according to the plea agreement entered in the U.S. District Court in Denver.
- Pilgrim’s is the first company to plead guilty for its role in a conspiracy to fix prices and rig bids for broiler chicken products.
- Thus far, ten executives and employees working for major broiler chicken producers have been charged.
- The investigation remains ongoing.
- Thus far, ten executives and employees working for major broiler chicken producers have been charged.
- From 2012 through at least 2017, Pilgrims took part in a conspiracy to suppress and eliminate competition for sales of broiler chicken products in the U.S.