Looking at the futures charts for live cattle and the feeder index, Stan Bevers, Ranch KPI LLC, told producers, “I think that chart looks a lot like trying to ride Bodacious, the world’s best bucking bull. Just up and down all over the place, you just don’t know where it’s going to be the next day.”
Bevers was speaking in a weekly educational webinar for Texas and Southwestern Cattle Raisers Association members.
Whether it’s folks trying to use futures for risk management or cow-calf producers with calves they’re needing to sell right now, volatility is spoiling cattle markets on a number of levels.
“There’s just no confidence in where people believe this is going,” Bevers explained. “If there is uncertainty in not only the cattle market, but any market, traders will try to push it down. That’s just the rules of the games they play.
“If you have calves you need to move, what you hope is the day you choose to sell, the board is up. But it may be down. The range this last month was between $1 to $1.30. You’re talking $200/head on a feeder calf,” he said. On fat steers, cash prices have dropped from about $1.20 when this started down to $.85 – or about a $35 drop on a 1,350-lb. animal.
Cull cow prices have also seen an abrupt U-turn, and that market is likely to get worse, Bevers said.
“Two weeks ago, cull cow prices were rising,” he explained. “Everybody was looking for ground beef. That door got slammed in a hurry. If a packer has a choice between fat steers and heifers or utility cows, they are going to choose steers or heifers instead of cows. So almost overnight, utility cows went from about $68 down to $58.”
With packing facilities not operating at 100% – both due to facilities idled during the last drop in cattle numbers and increasingly over COVID-19 issues – the competition for hook space is going to be a critical issue for the cull market. Bevers said cows may get turned away this fall.
At best, major packers are slowing chain speeds in order to create more space between workers as a preventative measure. At worst, there could be a major beef plant shut down indefinitely, like Smithfield Foods pork plant in Sioux Falls that closed April 12 at the mayor’s and governor’s requests with 230 employees testing positive.
The same day, a JBS plant in Greeley, Colorado, announced a temporary shutdown for deep cleaning after one employee died and dozens of others tested positive.
There is one certainty Bevers pointed out: “The longer this lasts, the greater the effect on cattle markets.”
Sharla Ishmael is the managing editor of The Cattleman magazine, TSCRA’s flagship publication.