Current Cattle Market Daily Headlines for Tuesday, October 20, 2020

by | Oct 19, 2020 | 0 comments

Interview: Agriculture Secretary Perdue gives industry high marks for Covid response

  • Recently, Secretary Perdue sat down with Meatingplace to discuss improvements that are needed within the processing sector, along with a few lessons that have been learned throughout the pandemic.
  • When the pandemic first hit, Perdue was most worried about restaurant shutdowns and the closing of our economy, both of which caused major disruptions in our food supply chain.
  • Perdue believes that the meat processing industry will be seeing more mechanization within plants as they continue to adopt more CDC and OSHA standards. This will clearly hurt employment, but will be more predictable in situations such as a pandemic.
    • The pandemic has caused plants to lose efficiency and is costing them more to operate at today’s kill levels. This combined with consumers wanting low-priced protein will cause plants to operate at the most efficient levels possible.
  • According to Perdue, the USDA was concerned about the price divergence that occurred after the Tyson plant fire in Holcomb, KS in the fall of 2019 and when the pandemic hit earlier this year. As to why this price divergence occurred, Perdue has no idea.
    • Packer concentration may be a factor, but so far, there is no smoking-gun conspiracy of price manipulation contrary to what cattle producers would love to have evidence of.
  • Perdue and the USDA are open to the many legislative proposals that have come forward to help facilitate growth of small, local processors; one of those ideas being able to sell out of state without being USDA certified. Perdue claims this is a risky proposal because food safety is a zero-tolerance business and the USDA stamp is needed to ensure this.
    • Food safety is more difficult to ensure in smaller facilities because they can’t afford the overtime that’s required to support food safety inspection.
  • Overall, Perdue is most proud of the USDA making sure they had food safety inspectors all throughout the pandemic in processing plants. He feels that the USDA corrected the food supply chain in a timely fashion and avoided additional panic in grocery stores because of the agency’s efforts.


NCBA releases report on price discovery recommendations

  • Price discovery has always been a top priority for NCBA and at their 2020 Summer Business Meeting, a subgroup of seven producer leaders was appointed to construct a voluntary framework focused on this topic.
    • This framework includes triggers based on regional levels of negotiated trade, to increase frequent, transparent, and measured negotiated trade to regionally sufficient levels to achieve robust price discovery determined by NCBA funded and directed research in all major cattle feeding regions.
      • If this voluntary approach doesn’t work, NCBA will pursue a legislative or regulatory solution determined by its membership.
    • A deadline of October 1st was set for this plan to be formulated.
    • After months of meetings, the subgroup has delivered its framework focused on price discovery called “A Voluntary Framework to Achieve Price Discovery in the Fed Cattle Market.”
      • This plan is meant to increase negotiated trade and incentivize major packers’ to increase their negotiated trade participation.
      • The framework is based around a “75% Plan,” which is designed to provide negotiated trade and packer participation benchmarks for the industry to strive toward.
    • To avoid tripping triggers, in any given quarter, each region must:
      • Achieve no less than 75 percent of the weekly negotiated trade volume that current academic literature indicates is necessary for robust price discovery in that specific region,
        • Achieve this negotiated trade threshold no less than 75 percent of the reporting weeks in a quarter.
      • Achieve no less than 75 percent of the weekly packer participation requirements, to be determined in short order, and assigned to each specific region.
        • Achieve this packer participation threshold no less than 75 percent of the reporting weeks in a quarter.
      • If any triggers are tripped in any two out of four rolling quarters, the subgroup will advise NCBA to pursue a legislative or regulatory solution to work towards robust price discovery.
    • Marty Smith, NCBA President, said that he is confident that the cattle industry will meet this challenge as it always does; head-on and at full steam. Together we can ensure price transparency and robust price discovery in our markets.


Boxed beef prices

  • Choice boxed beef: $209.74 (-0.29)
  • Select boxed beef: $191.84 (-1.68)


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How did we get here?

From the Holcomb Tyson fire to COVID-19;
Click to see a timeline of events that have brought to light the profit and pricing disparity in cattle markets.


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