Pandemic is impacting     cattle prices for producers

Producers and feed lot representatives bid on cattle during last week’s auction at the Parsons Livestock Auction. Nearly 750 head of cattle went to 44 buyers in attendance and online, the most in several weeks.

 

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Amid rising beef prices, cattle producers are struggling to break even because of the coronavirus pandemic, and many are now counting their losses.

“We’ve had decent runs so far, but it’s hurt all of our numbers, because everyone’s been holding on to these big cattle thinking, ‘We’ll give it two or three more weeks and then it will get better.’ Then it’s, ‘We’ll wait another two or three weeks.’ Well, they should have just sold them right off the bat when they were worth $150 a head more,” Parsons Livestock Auction owner and manager Wade Dillinger said Monday. “I’ve had lots of calls today, eight and nine weight cattle, steers, you’ve got to sell them, you can’t keep them.”

Producers can’t afford to keep the steers any longer. Lighter weight steers fetch higher prices. So paying to make steers bigger doesn’t make sense.

“If we keep them till they weigh 900, we’re going to get less than if they weighed 775, so why put any more money in them, and they’re big enough,” Dillinger said.

When one looks at the market, the situation looks more grave.

“As far as the whole marketwise, it’s falling apart,” Dillinger said. “Our main problem, of course, everyone is figuring out by now, is the packers on the end after they buy the cattle out of the feed yard.”

Monday, he said, if the price went up at all, it would break $3 (per hundredweight) in the boxed beef — cuts of beef put in boxes for shipping from a packing plant to retailers. Dillinger said $2.87 is about as high as the prices got in 2014, when prices went crazy.

“They broke that last week. Boxed beef went up $60 going to the retail stores. The reason being so many plants are closed … due to sickness, due to cleaning. Their capacity to kill cattle is way down.

“They were talking 400,000 for the whole week and they usually kill 650,000 a week. That is causing there to be somewhat of a shortage going to the stores,” Dillinger said. “These good ol’ packers, they are ramming it to them even worse, marking it up even more because they know there is a shortage.”

He said there are many cattle in feed yards, which are always full this time of year. 

“There is a big wave of cattle come out fat and ready to go in the middle of summer, in the months of May, June, July even into August. They were giving $1 (per hundredweight) for them last week, and then they are selling them for $3. … Steers are weighing about 920 pounds hanging weight, so the packers are making about $1,200 a head,” he said.

Dillinger said even feed lots are losing money to the packers presently.

“It’s getting where they’ve got everyone mad now,” he said.

There are some bills in the U.S. Senate that producers and others are trying to get passed that would require packers to purchase the majority of their cattle needs in the competitive marketplace and would prevent the packers from procuring cattle without having to negotiate a price. One requires at least a 30% negotiated trade per packing house per week. 

“They’ve got to buy that many negotiated cattle, where they actually bid on them,” Dillinger said. “So many of their other ones nowadays, they are contracted already, formulated is what they call them. They will buy them four or five weeks out. They price them on the cattle they buy live on the cash trade. They’ve gotten so good at it, they go buy lower quality cattle and they give those guys a pretty good price. They’ve got it figured out where they can manipulate the market like that. All they have to do is show they’ve bought a few cattle for this lower price and they can put it in their formula, then they’ve got us and there is nothing we can do about it.”

For example, the week before last the price was $1.05. For cattle on the bottom end, those producers are tickled to get $1.05, but Dillinger said for those who have higher quality beef, they are cheated.

“Everybody who had really good cattle then only got $1.05 because that is what the cash market was. Those good cattle should have been $10 higher or $15 higher. There’s four of those big packing plants that kill most of them. It’s like a monopoly. It shouldn’t be. They are not supposed to be able to do that, but it is happening,” he said. “With at least 30% minimum it will give us a chance to get value out of them, because right now it is just what they buy the cheapest value cattle for is what they mark them all at. That’s what everyone gets paid at. It’s robbery is what it is.”

Another portion of the legislation requires packing houses to pick up the cattle within 14 days.

“So if they buy them, they have 14 days to get them out of there. That’s getting to be a problem as well when they sit in these feed lots. The ones that they bought, they are not picking them up. They say, ‘Sorry, we don’t have room,’ and then they may make you feed them another three or four weeks. A 1,300 pound steer eating 35 or 40 pounds a day, it’s going to cost you another $40, $50, or $60 a head just to hang on to them until they come get them, and it’s not really your responsibility, because you have done sold them the cattle. There is nothing legal that they can’t do about that right now, so that is why a lot of them are pushing the bill. It’s not going to solve the whole deal, but it will really help.”

Dillinger said producers have the Department of Justice investigating and the Packers and Stockyards Act. The P&S is a fair-trade practice and payment protection law that promotes fair marketing environments for the livestock, meat and poultry industries.

Some producers/feedlot operators took it seriously enough to file a lawsuit last week against the “Big Four” beef packers for conspiring to fix cattle prices so producers are being denied the value of their livestock.

The plaintiffs in the class action suit are led by Ranchers-Cattlemen Action Legal Fund United Stockgrowers of America (R-CALF USA), which alleges a group of U.S. meatpackers engaged in a conspiracy to artificially depress cattle prices — resulting in lower prices for producers and record profits for the industry. The defendants include the “Big Four”: Tyson Foods, JBS, Cargill and National Beef, and several others.

Dillinger said everybody thought with the Department of Justice involved the Big Four would back off, but in the middle of the pandemic, packers ran the price of boxed beef up $60 last week.

“It doesn’t bother the packers. They don’t care. They don’t care if they slap them with a fine. That’s not going to bother them. In what is known as the Five Area, which includes five cattle states, Dillinger said producers sold 84,000 head last week. 

“Of course, packers were making around $1,000 so they made $84 million in the Five Area alone. Now they are saying it will be up to $1,150 or $1,200 this week so they are going to make $100 million, while suppliers and producers are losing $300 to $500 a head,” Dillinger said. “It’s out of hand.”

He and other producers are hopeful the bills in the Senate, backed by thousands, will be passed by September. There are a few that oppose it. They want a greater benefit, but Dillinger said the 30% minimum makes it a little more competitive at least. 

With any luck, the effects of the pandemic will level off soon, and the market will move back toward producers’ favor in three or four months, but Dillinger said it’s too late for the cattle producers now.

“It’s hurting the producers. I’ve talked to a few who raise mostly their own, but they buy a few to put with them and they utilize wheat pasture. One guy said, ‘I just should have went fishing or hunting or went on vacation last winter and not bought any cattle. I don’t know if we’re even going to break even. We’re going to lose something,’” Dillinger said. “The guys that bought cattle, they are the ones that are really hurting, because they are going to lose several hundred a head.

“The problem is going to be for a little bit, until they get these packing houses opened back up and going. If we do kick people back loose and they start going to these restaurants and go using more beef, there is going to be a shortage until they get going again. I know a couple of them they are supposed to open back up this week with one shift. It should get better later in the fall. The market should turn around and get better. Hopefully the virus doesn’t blow back up in the fall.”

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