"President Trump announced plans to mandate the nation's meat plants to remain open. Using an executive order and the Defense Production Act the President will use all resources of the federal government to assure delivery of food. In addition the President will supply protective gear to meat plants in an effort to make safe the workplace. The difficulty at a beef plant with erratic worker attendance is scheduling. You plan in advance for the next day's slaughter volumes but those plans must be flexible for last minute changes. Cattle are order in from the feedyard but the successful completion of the day's processing rests with the workforce. Shortages of people cause major problems. Missing people require reassignment of individual jobs and if shortages are serious enough, they can stop an entire shift. Yesterday's slaughter was 2000 head short of last week as one Kansas plant failed to process and will not resume until tomorrow. Other plants are slowing increasing volumes but all slaughter is woefully inadequate and threatening the role of meat in the diet of American consumers. It is as simple as you either can't find it or you can't afford it. The composite cutout has now increased in price by one third in the past ten days and reached an unbelievable high of $312 for the choice cuts. The current market is part orchestrated, part chaos. The packers propped up some prices holding the $100 paid for some cattle in Nebraska. Other cattle fell into their hands at $150 dressed or a $95 equivalent. The price discovery bears some semblance to the oil markets. Oil, without a place to store it, soon loses its value. Fed and overfed cattle are in the same position. Media stories of meat shortages were on full display across the web over the weekend. An feature of USDA's food assistance plan is the purchase of additional supplies of all meats. This does not need to occur now when demand for meat is high and prices even higher. Government purchases need to wait until processing volumes are restored and beef prices have declined from record highs. Aid packages to business operations will reopen this week with additional funds for the PPP program. Livestock associations are requesting Secretary Purdue to remove the $125,000 cap on funds available for damage to the financial profile of the many livestock operations across the country. Lenders are watching current close outs that are moving into an area of several hundred dollar losses per head. Cattle Futures. The contrast between WTI Crude and Brent oil futures is instructive. WTI Crude is a delivery contract traded at the CME of oil to Cushing, Oklahoma. The Brent oil contract is traded on the ICE commodity exchange and is cash settled. Traders are abandoning the delivery contract in favor of the cash settled because no longs want to own a delivery product. (Interesting perspective.) Weekly blurb... ------- The status of various beef processing plants in our country and Canada is dynamic and changing by the day and sometimes by the hour. Hopefully, this past week will mark the low point in slaughter volumes that were almost 30% smaller than prior year. We only slaughtered 469,000 head compared to 642,000 last year. Drovers Ag Journal has provided a wonderful interactive map showing the processing plants that are open and those that are closed. https://www.google.com/maps/d/viewer?mid=1Whf_evOa2-WC_EpE2jj1j6Y1ZDZQmt3C&ll=38.68557162272549%2C-96.09577624322162&z=3 This map does not provide the details of each day's slaughter by plant. The only information available is the daily total on the USDA daily slaughter and beef report. The disruptions created by the shutdowns and slowdowns are too numerous to list but some of the most important impacts are: Lost sales. Beef that is rationed means beef that is not eaten by a consumer who is prepared to purchase. There also will be lost sales from high prices. The demand curve for beef is elastic and beef can price out of the price range for many buyers. Live cattle flows. Orderly flows of cattle from pasture to feedlot to beef plant are important in prevent gaps in the supply chain of too much or too little beef. Consumers desire a reliable, reasonable priced supply of beef and the slaughter shut down has created the opposite. Dysfunctional marketplace. This past week will be a poster for totally dysfunctional markets whether in the boxed beef, cash trade, or futures trade. None of these markets were working and all have the feeling of "on the fly" guesswork at pricing. Cash market had $15 price ranges. Box prices jumped $40+. Stockers and feeders changed hands at prices changing by the hour. Futures closed in the mid 80s down from $120 earlier this year. Rebuilding lost capacity with occur with small daily changes and thoughtful innovation. The primary building block will be restoring a healthy workforce with respect and appreciation of the valuable contribution they make to the nation's food supply. Across the country improvements to the facilities and monitoring of their health, will mitigate the health risk to those working in the beef plants. Some changes will slow the processing speeds and others will change the way the carcasses are cut but all will focus on re-establishing normal volumes to the food supply chain. The task of working off almost 500,000 head of surplus finished cattle will not be easy or quick. As processing volumes increase, prices for boxed beef will fall. A more difficult scenario to anticipate will be the forecast of prices in the live trade. Both fed and replacement markets will be finding their way through this crisis with little guidance from rational supply/demand signals. Progress will occur a day at a time and surprises will be the order of the day.
I wish there was something like Pheasant Futures, Duck Futures or Turkey Futures. Then again, maybe its time for the exchange to add some new Futures products. wrbtrader
We are in NJ have meat in stores, but they sell only two packets per customer. So far not bad, but if it comes to zero, meat lovers will be upset. I’m OK with fish and chicken.
Same here but unfortunately fish (not chicken) is one of those markets that easily get overpriced, manipulated and so on at the expense of the consumer. wrbtrader
Sorry but if you lot all turn vegan then I'm out of here, you'll be wearing sandles before you know it
Today's blurb... "One company jumped in and bought a couple thousand cattle in the south at 105. This had an immediate reaction in futures prices that rose the permissible limit before fading back for the close. It also added a new range to weekly prices that ranged from $90 to $105. It is the hope of the entire industry that this week is the low in slaughter volumes and we build from this low point forward. This week's 4 day total is 301,000 head, 38,000 under last week's low number and 184,000 under the 4 day total last year -- very scary numbers. Tracking the number of backed up cattle is entering the calculations for everyone. A set aside program has been introduced for the United States and will be an important part of dealing with the surplus feedyard numbers. Click here for the program description. US Set Aside Program The damage done is immense. Over 500,000 cattle are backed up in the nation's feedyards. Retail and food service businesses are paniced causing the price of beef to move from $212 to over $350 in 10 days. The more than adequate, and some would say surplus, supply of cattle is being characterized in the press as a beef shortage leaving the clock ticking as plants struggle to get the workforce back into the plants. Extra pay, and improved conditions are the solution but kick back from the unions and a few disgruntled employees are often the focus of newsstories. Until a more normalized processing level is established, market reports will be extremely unreliable and in some cases meaningless. Any mention of price will not mean that price is available or reliable as a benchmark. The price spreads will remain wide between panic sales and/or ochestrated purchases. The range this week has been from $90-100 live and $148-160 dressed. The online fed cattle auction was case in point. Two pricing teers of steers of similar quality and weight sold - one group at $94 and the other at $100-- no explanation offered or possible. Cattle Futures. The April contract expired at $90." The bolded bit was certainly evidenced in today's June LE chart... Been wanting to jump in on some long live cows, but the plant closures have me confused and how to intermingle that with demand structure..