Market volatility reigns
It’s been said numbers never lie, they simply tell different stories depending on the math of the tellers. The story told by soaring boxed beef prices and low kill numbers hasn’t been a positive one for producers.
ShayLe Stewart, DTN market analyst, said if the market were performing like it should and boxed beef prices were soaring, it would be one thing but the current situation is weighing heavily on producers who know the same prices will once again come down. May is the year’s largest grilling month with high demand for beef but Stewart said last week alone, the price of choice boxed beef jumped $54 and select $52.
“To see $50 advancements in one week, a matter of five days, is absolutely unheard of,” Stewart said. “We keep track of daily gains and when they break through previous ceilings but, to some degree, we stopped sharing it because it was day after day after day for almost four weeks now.”
The advancements in price, she said, are absurd. With Trump’s executive order meant to keep the packing plants functioning, the hope is certainly to see a move in the markets. Stewart said 128,000 head per day is approximate capacity for kill in the U.S. and packers have been at limited kill at 78,000 head per day in the past four weeks.
“Even though we got this bullish announcement that President Trump is going to help the market by getting packing plants up and running, it’s not going to immediately affect the market because we have got to kill all those cattle still,” she said. “We have a pent-up supply behind the packing plants and the consumer that’s crying for more product.”
Ryan Bernstein, a senior consultant at McGuire Woods in Washington D.C., said consumers are learning how farm to table works and just how interconnected the U.S. food supply is. Bernstein, originally from a North Dakota farming and cattle operation, is the former chief of staff for North Dakota’s U.S. Sen. John Hoeven and a senior adviser to three North Dakota governors.
Bernstein said there is little doubt that conversations will continue when the House and Senate reconvene about increasing support for rural America.
“It’s fair to say we will see more attention to agriculture in the next COVID bill,” he said. “There is bipartisan talk at this point both in the House and the Senate about increasing the amount of capacity of the Commodity Credit Corporation. I think that has a very good chance of being expanded when people return to D.C.”
Bernstein said he believes there is increased awareness in D.C. of the need for additional cooperation and collaboration between the processors and state and local health officials, Occupational Safety and Health Administration and the Centers for Disease Control. He said more needs to be done at the state and federal level to ensure processors have the infrastructure necessary to implement the CDC recommendations, including spacing, screening, barriers and PPE.
In the long term, he anticipates changes in how food is delivered to the consumer that will highlight innovation on the part of the producer and retailers.
As for imports, Stewart said the situation isn’t a simple one. Stephen Koontz, a professor in the Department of Agriculture and Resource Economics at Colorado State University, said imported beef from Namibia, which have been the source of much discourse online, totaled about 25 tons and was likely a back haul bound for the port at Philadelphia. Known for grass fed beef, the African country’s beef was likely blended with 50 percent trim for grind.
Increasing the cash trade by requiring packers to purchase 30 percent of their kill on the cash market for delivery within 14 days of the sale agreement is something Stewart said could increase price discovery and offer the opportunity to boost the cash basis.
Koontz said increasing the cash trade by mandate could be costly for the industry. Mandating Country of Origin Labeling, he said, would likely return little to producers as he said consumers are unwilling to pay a premium for the label.
“I would love to tell you when this is going to be over and I would love to tell you where the bottom is but if I did tell you that, I would be lying to you,” Stewart said. “The truth of the matter is we will get through this, but the problem is we don’t know when and we don’t know how much lower it will get.” ❖
— Gabel is an assistant editor and reporter for The Fence Post. She can be reached at firstname.lastname@example.org or (970) 768-0024.
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