From Our Side of the Fence

EMCC Owner/Partner

November 2019 finds us in a much better place on the production side of the cattle business than we were last year. Plentiful grass and hay has given a lot of market support to the bred cows and backgrounding type calves.

The marketing side however is a different story. In 2018, we received the smallest portion of the retail dollar in history and 2019 will blow past that dismal figure.

We have steadily gained ground with fat cattle and have recovered to pre-Tyson Holcomb, KS fire levels of $110 plus, but now the pound cow markets have tumbled lower. Bottom line is the pound cows and fat cattle are all being “stolen” by the packers from the farmers and independent cattle feeders. Every pound cow you sell, the packer makes $400-$550 per head, leaving us the crumbs.

I don’t see any intervention or solution to this problem on the horizon. We have one chance at a better market and that is providing protein for the Asians because their hogs have died due to African Swine Fever (ASF). If we don’t see a drastic improvement by April, then I believe we are doomed to a life as serfs and debt slaves.

I do not understand why with the surge in protein demand coming, why protein producers like ourselves are allowed to be crushed? Any prudent attentive government should have jumped at the economic opportunities this shift in protein demand will bring. One would think we would be nurtured and encouraged to expand. I wonder IF we were well compensated how much beef we could actually produce? I believe easily double and maybe triple our output. The key of course is being “incentivized” and “compensated” accordingly.

Packers aside, everything else is beginning to point to a better picture. USDA numbers indicate that our production numbers have peaked and we are beginning the contraction phase of the cattle cycle. As of the end of August, the Cattle On Feed (COF) inventory is very bullish, with only 97% placements from a year ago.

October’s COF report just released Friday giving the numbers for September is being called a neutral report with some positives; 2 percent more heifers on feed, one percent more marketings and four percent “other disappearences” over year ago figures, but the placements came in two percent on total head put on feed for the month above year ago as a negative. Overall it may not be as positive this time, but it sure isn’t negative. Which in itself a small victory.

The cattle business is definitely changing. One change I see is the fed market is dividing into independent fed price and corporate deal fed price. Yes, this is similar to the pre-2000 hog business.

This fed cattle market is affecting our feeder market prices more and more. Market outlets and demand for plainer second cut or what we often refer to as “feeding cattle” is leaving as the people (smaller independent cattle feeders) who have always backgrounded and fed those cattle are being forced out of business. It’s been a little over a year ago that I originally warned that discounts for longhorns, Holsteins, Herefords, white nose Charolais, club calf rejects, spots and stripes, eared calves and other humps n bumps etc. will become increasingly greater. It is just happening a lot faster and deeper than I expected.

I was once told that “perception eventually becomes reality”. Earlier I mentioned “backgrounding type calves”. These are usually the higher quality cattle that reselling as yearlings is nearly always a viable option. To be blunt, for many people this means black hided. The old saying “they don’t have to be good; they just have to be black” is currently more true than I care to admit. The perception promoted by millions of dollars in advertising campaigns that black cattle are better has permeated our industry for so long in many buyers’ minds all the way up the chain it has become the truth.

I love good cattle of all colors and it pains me to have to concede and write this next sentence. The easiest thing as a producer to do is to make your calves black. If you as a cow calf producer are going to sell calves (especially unweaned calves), the best demand is for black hided steers. If you are backgrounding cattle to resell, the most and best market demand is for heavy black steers and 6 weight black heifers.

My ol’dad used to tell people “ya got to sell them when they wanna buy ‘em” -- well now it is becoming clear that with the corporate feeders with feeding deals “ya got to sell them what they wanna buy”. The big opportunity moving forward may be for backgrounders to buy good calves.

Just so we’re all clear, I’m conceding the perception, not the reality. I still believe that the best commercial cow is Red Angus based, and the best cattle to grow, feed and hang are the Charolais Red Angus mellow yellows and crossbred smokies. One other clarification is that crossbred backgrounded steers are in demand, especially in load lots. This is especially true if the steers are sold as true yearlings weighing over 800 pounds. Bob and Barb Brouster prove this every 6 weeks in Bowling Green. Another advantage Bob and Barb have that drastically increases the value of the second load/ colored cross bred cattle is the fact that for efficiency, many feedyards have gone to 2 load pens.

Ironically most of us have been conditioned to believe that on the grids yield grade 2’s and 3’s with a Certified Angus Beef (CAB) label is the pinnacle on the price structure. I recently had a buyer tell me that his last load of cattle that he killed on a grid the information sheet came back and his CAB cattle had a $6 cwt premium while his “non-black” yield grade 2’s and 3’s had a $9 cwt premium. Sometimes perception is not reality.

As an industry, our great market hope lies with surging demand and higher prices for beef as greater numbers of hogs die overseas due to ASF. The big secret of ASF is finally beginning to leak out, including an interesting story I read about the Chinese now turning to eat their dogs. Worldwide, dogs perceive themselves as man’s best friend, but in China today that perception is not reality. I also heard there were two Chinese cannibals eating a clown and one looked to the other and said… Does this taste funny to you?

Likewise, as an American, China is not our friend nor will it ever be. We may get to the point where we trade to our mutual benefit, but China isn’t to be truly trusted. If you’d like to know more, invest an hour and watch Kyle Bass interview General Robert Spalding, both great patriots. The interview is easily found online on YouTube. Here are some highlights:
There are currently 3 million people in Chinese concentration camps at Shen Zing. While at these slave labor camps, some prisoners are victims of forced organ transplants. To know the heart of the Communist Chinese Party, study forced Chinese organ transplants for a few minutes.

There were 75,000 opioid deaths in America last year. That’s 20,000 more than the 54,000 Americans that died in Vietnam. There were 48,000 fentanyl deaths last year with 95% of this drug being manufactured legally in China and then smuggled into America. Last month, a shipment of fentanyl was intercepted that was large enough to potentially kill 12 million people. This is no accident; this is China’s policy.

This interview also covers America being distracted and deceived, the crucial importance of the up and coming 5-G network, and finally China’s policy of suppressing dissent in the U.S. and abroad. The recent controversy surrounding National Basketball Association and their suppression of free speech is a clear example.

Another Kyle Bass interview that is very interesting concerning China is with Guo (Miles Kwok ). In this interview, he highlights the Chinese Communist Party and their plan for destroying America.

Finally, every month I like to include any opportunities that I see. It looks like we will be suffering through a very weak pound cow market for a few more weeks. If you want what appears to be a safe winter project, it looks like older bred cows are a possibility. Short solid and good broken mouth 2nd stage cows can be bought now at pound price, which is roughly $.55. For those of you looking to market excess hay, this might be an option to consider.

Recently the unvaccinated, bawling calf market has come under a great deal of pressure, so for backgrounding I believe it’s time to buy a few. I think this softer market is temporary and will rebound after harvest.

That’s where I’ll leave it for this month. I’ll see you at the auction.