What Gives?

This market has inadvertently turned every single one of us into speculators - and hard ones at that. It hasn’t given us anything good worth talking about for the past few months, besides a semi-bullish Cattle On Feed report that the market turned a blind eye to.

I suppose now that we are officially importing live feeders from Mexico again, the fundamental backstop that has inevitably saved us before is less relevant in today's marketplace - specifically to the ones selling this market like the ship is going down. At this point, I could throw every ounce of optimism I have at you, but at the end of the day, Chicago couldn’t care less about the domestic herd size. Mexican feeder crossings are overriding that thought process for now because every head that crosses is one more than we had the day before.

The fact of the matter is, total cattle numbers are increasing even though we don’t have the domestically owned beef cows to show for it. Available beef supplies are also increasing, whether they come from imports or the ridiculously positive evolution of the U.S. cattle industry through better genetics and efficiency . The consumer holds the cards here. How much beef are they demanding, what cuts do they want, and what does the revised U.S. herd size truly need to look like to comfortably meet that demand picture? Because while herd size has diminished, beef production has stayed relatively strong through larger cattle. Compared to 10 years ago, we get 50–60 more pounds of beef per carcass. That increases to 85–100 pounds compared to 20 years ago, 120–135 pounds compared to 30 years ago, and roughly 350 pounds more per carcass than we got 70 years ago.

And although the U.S. population has grown, per-capita beef consumption has fallen from its peak of roughly 84 pounds per person annually to around 57–59 pounds today. Of that consumption, 25% is steaks, 25% is roasts, and 50% is ground beef. That leaves us needing to find a home for the rest of the animal through the export market. So while we haven’t completely erased the gap between beef production and herd count, we’ve certainly narrowed it – largely due to imports, but also through better efficiency and genetics in the U.S which leads me to believe what’s realistic and what’s actually needed may be closer together in today’s marketplace than we think.

And unfortunately, what is needed and what’s cost-feasible for us as producers is more disconnected now that feeder cattle futures are $47/cwt off their highs. That, compared with the blows we’ve taken from imports, government intervention, and reduced slaughter capacity, has led a lot of us to lose any and all confidence to retain heifers. While others are living with the legit reality of already having bred those heifers and now have to accommodate for them.

But back to the one-way train station at the border - as of yesterday, exactly 692 Mexican feeder cattle had crossed, with only 24 rejected due to lesions, cuts, scratches, and other concerns. The current daily limit is set at 700 head for this week. Then, in roughly 30 days, imports are expected to begin through Santa Teresa - the largest cattle port on the southern border, accounting for approximately 40% of the live cattle we import from Mexico. And once again, every head imported today is one more than we had yesterday, and unfortunately, the board doesn’t care what the rest of us have to say about it. If you need to get protection on, I would start seriously considering it. Today’s prices might look considerably better than what’s still to come. And that's not me just being doom and gloom - that's me looking out for my fellow producers - because if we don't look out for each other, who will? 

Thanks,

Samantha Cozza-Wright