While many cattle feeders and beef packers are using USDA price reports to figure out what fed cattle are worth, many seem to be avoiding them.
The hue and cry over fed cattle price discovery has increased over the last several years as a smaller percentage of them are sold on the open market. But if cattle feeders don’t feel comfortable with using the USDA reports to base a grid, forward contract or formula price, it really isn’t for a lack of trying by the USDA.
The USDA has developed several new reports since mandatory price reporting became law in 1999, all aimed at helping cattle feeders and beef packers determine what fed cattle are worth. Nearly all of them can be found on the USDA’s web portal called DataMart, which can be found at https://mpr.datamart.ams.usda.gov/.
ISSUES NOT NEW
“Price discovery is not a new issue for the beef industry,” said Nevil Speer, director of industry relations for Where Food Comes From, Inc, in an emailed reply to a question. “Within all that discussion, the industry would be well served to draw upon some of the work done 20 years ago through NCBA’s Price Discovery Think Tank.
“The discussion papers (from 2002) do an outstanding job of outlining some of the challenges that have long been in existence – and providing some alternative applications that are especially useful, most notably increasingly tying the value of live cattle to the wholesale beef market,” Speer said.
Among the reports stemming from the Mandatory Price Reporting law was the National Comprehensive Boxed Beef Cutout for All Fed Steer/Heifer Sales. This report comes out each Tuesday and covers beef sales transactions from the previous week. Since it provides a weekly comprehensive value for the meat, many consider it to be superior to the daily boxed beef market report, which relies on voluntary data and can be amended more easily.
Another couple of reports are the Morning and Afternoon National Slaughter Cattle Reviews for the previous business day. This report is a summary of other reports and gives a brief summary of open-market cattle trading from the previous day, along with negotiated, formula and contract purchases delivered to the packers on the day of publication; negotiated, formula and contract commitments delivered generally within seven days, and negotiated prices paid for domestic slaughter steers and heifers.
But to use this information, cattle feeders and packers will have to come to terms with the USDA reports and devise contracts that are favorable to both, a market analyst said. Such contracts have proven difficult to forge for many, but should be achievable.
CATTLE, BEEF RECAP
Fed cattle trading was reported in the Plains this week at $106 to $108 per cwt on a live basis, down $4 from last week. Dressed-basis trading was seen at $168 to $170 per cwt, down $4.
The USDA choice cutout Tuesday was down $5.78 per cwt at $225.02, while select was off $4.06 at $205.42. The choice/select spread narrowed to $19.60 from $21.32 with 161 loads of fabricated product and 68 loads of trimmings and grinds sold into the spot market.
The USDA reported Tuesday that basis bids for corn from livestock feeding operations in the Southern Plains were unchanged at $1.05 to $1.09 a bushel over the Mar CBOT futures contract, which settled at $4.19 3/4 a bushel, down 0.04 1/4.
Delivery intentions for live cattle futures were not available Tuesday.
The CME Feeder Cattle Index for the seven days ended Monday also was not available. Tuesday’s Jan contract settlement was $137.57 per cwt, down $0.22