It’s all over the news, especially in cattle country: The US Senate Judiciary Committee held hearings this week looking at examining what many see as a lack of competition in the cattle markets.
Whether anything comes of the hearings, or if legislated changes turn out to be good for the industry, independent cattle producers, packers or consumers remains to be seen, a market analyst said.
“Be careful what you wish for,” another analyst said.
A LITTLE HISTORY
Some cattle producers have been pushing for more government intervention in cash cattle markets for decades. They say that when only one packer buyer shows up to bid on slaughter-ready cattle that all competition ceases. They either have to take what the buyer offers them or feed the cattle for another week, which often is counterproductive.
Many have called for a breakup of the four major packing firms, Tyson Foods, JBS, Cargill and National Beef, and others have called for stricter enforcement of the Packers and Stockyards Act. They say having four packers control up to 80% of the total US slaughter is too concentrated.
However, other economists have said such a forced breakup probably wouldn’t boost fed cattle prices since US slaughter capacity would not change. Parts of it would just be in different hands.
Critics also say that breaking up the big four would break down economies of scale that help packers operate profitably and keep consumer prices some of the lowest in the world for some of the safest and best-eating beef.
RECENT DEVELOPMENTS
What finally brought all this to a head was last year’s COVID shutdowns, which followed a major fire at Tyson Foods’ Holcomb, KS, the previous year. Both events severely disrupted the flow of cattle and beef to market and the way in which consumers bought, and ate, beef.
Effects of the Tyson fire were handled by the industry, and even Tyson itself, by adding extra shifts at other plants and trucking fed cattle longer distances for their date with destiny.
But feedlots that usually sold to Holcomb or other area packing companies suddenly found themselves down a buyer or faced with lower returns because of higher transportation costs, or both.
About when things were returning to normal, the pandemic hit, depriving packing plants of the employees needed to keep these behemoth plants singing. Some closed in an effort to control the disease until then-President Trump designated them essential businesses.
But disrupted beef markets and government stimulus money kept the beef markets strong, and relaxed COVID rules brought more beef demand and higher product prices while backed-up cattle supplies kept a lid on prices.
CATTLE, BEEF RECAP
Fed cattle traded this week at $119 to $123 per cwt on a live basis, up $1 from last week. Dressed-basis trade was at $195 to $196, steady to down $1.
The USDA choice cutout Thursday was up $2.06 per cwt at $275.22, while select was up $0.70 at $256.82. The choice/select spread widened to $18.40 from $17.04 with 74 loads of fabricated product and 38 loads of trimmings and grinds sold into the spot market.
The USDA reported Thursday that basis bids for corn from livestock feeding operations in the Southern Plains were unchanged at $1.86 to $1.91 a bushel over the Sep futures and for southwest Kansas were unchanged at $0.70 over Sep, which settled at $5.58 a bushel, up $0.08 3/4.
The CME Feeder Cattle Index for the seven days ended Wednesday was $154.00 per cwt down $0.36. This compares with Thursday’s Aug contract settlement of $158.50 per cwt, down $1.67.