Last week’s Cattle Industry Convention delivered a mixed bag of predictions for producers.
CattleFax’s CEO outlined a pandemic-fueled combination of shrinking cattle numbers and record demand hitting just as exports increase and harvest capacity grows, which puts power back in the hands of cattle producers.
And the general economy plays a part, too. Its bounce-back is bringing along inflationary pressures, but consumers continue to buy beef even as prices climb. It is what’s for dinner, after all.
CattleFax’s prediction? Fed cattle prices jumping from $121 to $135 per hundred, with peaks reaching $145 per hundred. Feeder cattle will feel the rising tide too, up to $200 per hundred from the $170 average in 2021.
Zoom out: Cattle prices have been on a bit of a roller coaster, dropping sharply in 2020 but making a full recovery. In current market conditions, producers can maximize the market by forward selling, buying call options, and buying puts—or asking their trusty Magic 8 Ball.
But not all good news: For some producers, lack of rain is overshadowing the market impact. Drought conditions across the upper Midwest and High Plains are drying up pastures and hayfields, leading some to depopulate their herds.
New Zealand researchers are hitting methane emissions from cattle with their best shot — a methane vaccine in the works that depends on… drool.
How to vax the rumen: Antibodies in a cow’s saliva ride through the digestive system, winding up in the stomach, where they bind to the pesky little methanogens that convert hydrogen into methane.
Getting enough of the antibodies in the rumen to be effective is the snag holding up the methane vaccine.
High gas bills: Test cattle have to be in full-body chambers that monitor gasses, but these chambers are expensive, costing up to $250,000.
A consortium of New Zealand livestock industry groups and the government have cost-shared the vaccine research, spending about $85M on R&D since 2003. They’ve dropped $4 to $5M a year since then on the silver saliva bullet.
Working around the clock: The New Zealand government aims to be the first nation in the world to fully fold agriculture into an emissions pricing scheme by 2025. The country accounts for about 0.16% of global emissions, half of which come from agriculture, and a quarter from dairy.
That moment when your body launches to the top of the seesaw at top speed? Beef packers, please remind us what that feels like.
Beef prices are going nuts. Choice boxed beef prices teetered over $300/cwt. And the wholesale Choice price is up 33%, second only to the record prices reached last year during the pandemic pan!c buying and supply chain meltdown.
Working overtime: To take advantage of markets, packers are gettin’ while the gettin’s good. In 2021, Saturday slaughters have been up 58% over 2020 and more than 92% over 2019.
The other end of the teeter-totter…
Cattle feeders can’t say the same. Fed cattle markets lost their early April rally and tottered down below $120/cwt.
Producers’ margins are tightening as feed grain prices rise sharply. Livestock Economist Scott Brown says for every 10-cent increase in feed costs, there’s an 80-cent decrease in feeder cattle prices just to break even.
And then there’s the d-word. The Drought Severity and Coverage Index is at 180 for the U.S. It’s never been this high in April or May in any year.
With diminishing pasture and hay production potential, there’s little incentive to grow the herd this year; signs point to accelerating beef cow liquidation.
JBS is having its own Inception moment.
The global meat player has created a blockchain platform that allows suppliers of JBS to register, well, their own suppliers.
In April, beef cattle producers began registering animal sellers on the Transparent Livestock Farming Platform, an initiative sponsored by JBS.
The goal is for all suppliers to comply with socio-environmental criteria for breeding beef cattle in the Amazon Biome.
Translation: The Federal Prosecution Office will use data received from the tool to look for any occurrences of deforestation, hard labor, invasion of indigenous lands, or other non-sustainable practices.
Playing by the rules: The results are sent to the JBS supplier, who now has a crystal clear view of socio-environmental compliance in his full supply chain. If there are issues, the supplier can create plans to dissolve the risks and assist producers in doing the right thing.
Ecotrace created the tool for JBS, but it is an open platform, so anyone in the industry can use the system.
And while that might sound a little sketch, blockchain technology keeps third-party information confidential, and JBS can only see the consolidated analysis of suppliers… aka no sensitive information.
Future state: Right now, signing up is voluntary, but by 2025, any cattle supplier interested in selling to JBS must be registered on the platform.
Thanks to a recent $12 million investment in a San Diego startup, a whole boatload of ranchers will soon be rotating their herds across rangeland without running another strand of wire.
“Oh, oh, it’s magic.”: Well, not really, but it is cutting-edge. With the help of GPS and some high-tech wearable collars, the Vence Corporation is providing ranchers with a 21st-century solution to open grazing and pasture rotation.
How it works: Using an app on his or her phone, a producer sets an “invisible fence” boundary by inputting GPS coordinates. Then, just strap a collar around Bessie’s neck, and she’s free to roam.
As a cow approaches a boundary, the collar emits a warning noise. If it ignores the warning, then it’s encouraged to turn around via a light electrical shock–just like an electric fence.
Oh, and this… It’s not just for keeping the herd venced in. Sensing the animal’s direction of movement, the collar also uses noise and shocks to herd the cattle to the next paddock.
But it’s about more than pasture management. With U.S. grasslands being the largest land-based carbon sink globally, preventing overgrazing by simplifying pasture rotation is a slam-dunk for combating climate change.
Where this goes: With the company’s new cash on hand, the 5,000 farmers lined up to get the service won’t have to wait long. And Vence plans to move forward with more R&D to service even more livestock producers.
Show me the cattle market transparency.
Senators Deb Fischer (R-Neb.) and Ron Wyden (D-Ore.) introduced the Cattle Market Transparency Act of 2021, which builds on years of research and discussion of negotiated trade of fed cattle.
Refresher: Negotiated trade or references to the spot/cash market is when a buyer and seller interact and determine an agreeable price on the day of sale. In the mid-2000s, 50%-60% of cattle sold went through the negotiated market. Over time, cattle producers have shifted to using formulas, grids, and other alternative marketing arrangements (AMAs) that help them manage risk and take home more bacon.
As a result, about 20% of cattle transactions are currently negotiated purchases with significant regional nuances.
The catch: AMAs depend on the price discovery from those direct, buyer-seller interactions. The cattle industry is united in agreement with economic research, saying there’s just not enough negotiated trade to provide sufficient price discovery.
But how the industry should go about making that change is where things get hairy.
Fischer’s bill calls on the USDA to set regional minimums of negotiated trade of fed cattle, establish a library of cattle formula contracts, and increase market data reports.
Where things stand: The American Farm Bureau Federation and U.S. Cattlemen’s Association are on board, but the National Cattlemen’s Beef Association is not down with the new approach yet…at least not until their voluntary industry plan fails to achieve enough price discovery.