Prioritize what’s important
It was a great week last week because I was able to take the entire week off and go to bull sales, get out in the country, and visit with you all. Bull sales are, for the most part, quite strong. Cattlemen are being a bit more selective about the bulls they buy, but the discussions are still focused on moisture and snowpack which is now concerning western producers a great deal.
Many producers in California never received their winter rain, which grows the bulk of their feed. There is speculation that cowherds will be culled very hard this year.
Speaking of cows, the comment period for the Canadian cow import rule is closed. Although, USDA will need some time to review the comments and make their decision, it seems pretty clear that they will elect to open the border to this class of cattle trade. The big question on many producers’ minds is what will the market impact be when these cattle start to enter the U.S.?
Other than hearing a lot of country speculation, we haven’t heard much. I spoke with market watcher Andy Gottschalk last week and he said we need to focus on the volume that we already slaughter in the U.S., which is around 4.8 to 5 million head of cows. The volume of cattle expected from Canada is around 600,000 head, which will be beef and dairy cattle and aren’t going to come at once.
However, on the other hand, the Canadian feed ban doesn’t necessarily bestow any confidence that the feed ban protocol has been effective. But, then again, we’re talking about just a few head and it does seem that we may need another lesson on the real threat from bovine spongiform encephalopathy, which is essentially zero. As far as the World Animal Health Organization is concerned, beef from cattle over 30 months of age with specified risk materials removed is safe for human consumption. The only real threat from Canadian cows is in the market. According to Gottschalk and other market analysts, little, if any, market impact will be realized.
This next cattle on feed report looks like it will be awfully bullish. Cattle on feed is expected to be 4-5 percent below a year ago. Marketings are expected to be up 4-7 percent and placements up just a few percent. All in all, it appears we have put the industry in a very positive posture for the second quarter to expand the market.
Carcass weights are down 19 pounds and slaughter remains strong. I certainly didn’t expect to see $1 cattle so soon. We knew the late winter and spring months would be pretty good, but I think a dollar fooled everyone. The weather markets have kept production in check and 80 cent cost of gain has helped cattle feeders maintain an aggressive marketing program. Some profitability on the packers’ side has also helped them maintain an aggressive buying posture.
Now that we know that the market is going to remain strong for awhile, we can focus some attention on other aspects of our industry.
I suppose we need to comment on the trials and tribulations at R-CALF USA, which is becoming entertaining. I’m sure for some, this is serious business; for others, amusement. Anyway, the rogue board of directors at R-CALF has taken control and they will pursue their efforts on mandatory Country of Origin Labeling, Rule 2, packer ownership and other market disrupting legislation that the industry really doesn’t need.
Ironically, this R-CALF board is getting a shot of its own medicine. Call it a coup, call it treason or anarchy, but the departed members of the board of directors decided that their only recourse was to create a new cattlemen’s organization. United States Cattlemen’s Association will attempt to pick up the pieces and advance the moderate causes of the former R-CALF Board.
This situation with cattlemen’s organizations is out of control. One would think that with as many groups as we have representing the industry, our voice in Washington, D.C., would be stronger. However, that’s not the case. It appears to me that the multitude of cattlemen’s groups will confuse the issues and create more frustration for legislators.
So, keep in mind, we have a good market for now. We have high feed costs and feeder cattle have maintained a very strong market, but it is vulnerable. My suggestion would be to focus your efforts on the market and what you can do to take advantage of it. Creating another cattlemen’s association seems more like a problem than a solution.