The Worst of Times ... and The Best of Times by Carol Wilson
L
ook around. We think because we are all a part of the cattle industry, we have similar goals and values. But we don’t. We aren’t even all in the same boat. Cattleman’s boats are taking on water and sinking. Feedlot boats are secure on the water with full lots and cattle hedged. Packer boats are in the harbor, getting rich with beef flying off the shelves at the highest prices in recorded history. And they aren’t sending lifelines back to producers. Though we’ve been in different boats for years, the 2019 fire in a packing plant in Kansas and the 2020 COVID-19 pandemic put a spotlight on the glaring differences: the Kansas fire took 6,500 head a day out of production and revealed that we had a broken cog in the wheel, making cattlemen very vulnerable. The pandemic was graphic, as we saw empty meat shelves in stores while we had pens full of fed cattle that no packer was bidding on. During the pandemic, Industry experts estimate packers were making $600 to $2,500 per head while ranchers were losing as much as $400 on each animal they produced. Those who care about the history, tradition and future of the livestock industry have been sickened by the carnage wrought by the beef industry upon the cattle industry, and are acting to save the cowboy, the small livestock producer, the backgrounder and the sale barn, the order buyer and the feed salesman, and work for a future in the livestock industry. Corbitt Wall of DV Auction is the articulate spokesperson for like-minded cattlemen, many from the Midwest, who have spearheaded the push for market transparency and cash values. Using his popular Feeder Flash, a daily market video which garners approximately 10,000 views per day, Wall is calling for robust price discovery in which packers have to buy a minimum number of fed cattle on a cash market, bidding on finished cattle just like every other part of the industry. Cattlemen have long realized that their calves and feeder cattle sell in a competitive market, yet fat cattle sell in what is essentially a non-competitive market. Contracts, cattle bought on futures, confidentiality agreements and buying behind a curtain of secrecy protect packers and feeders. It results in a captive market…because the packer can fill his daily quota
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Livestock Market Digest
without ever competing with other packers to buy cattle on a cash market. Packers and feeders both love this arrangement. But it is hell for the small producer who feeds cattle and for whom a good price for finished cattle might mean the difference between him staying in business or not. “Think of the difference it would make if the packers needed a few hundred finished cattle to make their quota each week and had to get out and bid on a competitive market to get them,” Wall stated. “It is all about trying to preserve as many players in the industry as possible,” Wall noted. “We want to keep small communities alive, keep the rancher able to pay taxes and keep their land investment. We want to save the industry and we realize we are vulnerable. If the packers had to get cattle on a cash market each week, get competitive with bids, it would really help.”
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Is there a rancher who is not concerned when the price of boxed beef that packers sell to retailers goes up 100% while cattle prices go down 30 percent?” The cash market is important for more than just one transaction. Cattle futures are based on the cash price, and the feeder and yearling markets are both based on and dependent on the cash price of finished cattle.
A PUSH FOR POLICY
Midwestern cattlemen tried to resolve concerns and lead the industry to more robust price discovery at the National Cattlemen’s Beef Association’s Live Cattle Marketing Committee at the end of July. After considering several proposals aimed at encouraging greater volumes of cash cattle trade, the minimum cash policy that had been originally presented was so watered down that nothing was achieved. According to Wall, “NCBA said they would hire a research analyst out of academia who will look at the trade to see if there is enough cash trade to make market transparency. We know there isn’t. In the Texas panhandle feedlots in 2015, only three percent of the cattle sold were cash. That means 97.4 percent of the cattle sold on some type of formula or contract. How hard would it be for the packers to manipulate less than three percent? Yet everything else is sold off of that three percent value.” Wall continued, “if we don’t achieve robust
price discovery, then the NCBA says it will pursue regulatory or legislative solutions. But that will entail a series of hoops that we will have to jump through get back to where we are now.” The push to get NCBA behind at least a 30 percent minimum cash market in a 14 day delivery period was important, according to Wall, because the government considers NCBA the voice of the beef industry. “They only set policy, but if their policy gets behind things, those things get done,” according to Wall. Even though, according to NCBA’s own figures, their paying membership of 25,000 is about three percent of the estimated 700,000 beef producers and feedlots in the nation, NCBA is still much bigger than other industry organizations and their voice carries a lot of influence when change is proposed. BEEF INDUSTRY OR CATTLE INDUSTRY?
How could the NCBA fail to support a minimum cash requirement which would benefit the cow-calf producers, yearling operators, and backgrounders? It is all about votes, and the Texas Cattle Feeders Association (TCFA) and Kansas Livestock Association (KLA), whose combined feedlot capacity make up half of the fed cattle in the nation, had the volume and the checkoff dollars to outvote the state affiliates who represent the cattlemen. “It is ridiculous how many states would have to vote together just to outvote TCFA and KLA,” noted Wall. “NCBA is the voice of the beef industry,” noted Wall. “Selling beef and selling cattle are two different things. This push for minimum cash market caused the NCBA to tip their hand and show everyone who they are made of, and who they would support. We found it was the corporate feedlots and the packers, not the ranchers. They don’t represent rancher Joe or rancher Bob, even though they collect their money from ranchers in the form of the Beef Checkoff.” BUYING THEIR BULLETS?
As the National Cattlemen’s Beef Association clearly isn’t representing cattlemen, some have called for a referendum on the Beef Checkoff, which is funded by cattlemen but is now part of the NCBA (the organization was originally just the NCA, or National Cattleman’s Association, before they merged with the checkoff and incorporated Beef to become the NCBA). “I don’t blame you people if you sign that referendum for the checkoff,” noted Wall in his Feeder Flash. “Selling beef and selling cattle are two different things, but our trade association is together. How can they speak for both of us? How can they represent the beef
