Lots of Cattle, but No Beef

GLENWOOD, Iowa (DTN) -- There are fat-cattle feeders in the countryside who haven't gotten a bid on their cattle in more than a month while boxed beef prices have soared into the stratosphere.

Meanwhile, major grocers such as Kroger, Costco, Walmart and Hy-Vee are now increasingly limiting meat sales. Even fast-food restaurant Wendy's -- once known for its "Where's the Beef" commercials -- is running out of beef to sell, the New York Times reports.

The disparity between live cattle prices and boxed beef prices is drawing more attention as USDA's boxed beef cutout values moved above $4 a pound on Monday and continued upward on Tuesday with choice at nearly $4.29 a pound and select at $4.11 a pound. Until last week, the record boxed beef price was $2.65 a pound in 2015.

"There are sale-barn guys who have been in the industry 30 or 40 years who said they never imagined a day would come when boxed beef prices were over $4," said ShayLe Stewart, DTN livestock analyst. "It's unfathomable. It's unprecedented."

At the same time, feeders can't get a bid on their cattle because of the COVID-19 crisis that has swept through the meatpacking industry over the past month. Live cattle futures for the June contract ended Tuesday at $86.47 per cwt, down about 27% from the high back in late January.

Mark Johnson, a South Dakota-based marketing agent for Producers Livestock in Omaha, said packer bids have thinned out, leaving a lot of smaller independent feeders with market-weight cattle they can't move.

"Right now, I am probably selling less than 20% of the cattle I would normally sell in a week," Johnson told DTN.

Beef and cattle are both commodities and they are similar, but they are not the same, he said.

"No matter what a person wants to say about it, it's capitalism at its finest," Johnson said. "You have sky-high demand on one side and an abundance of supply on the other."

Cattle slaughter last week was at 425,000 head, down 8% from the last week of April and nearly 37% below the same time a year ago.

For hogs, pork processing last week was 1.54 million head, down 22% from a week earlier and nearly 35% below last year.

President Donald Trump tasked USDA last week with ensuring packing plants reopen or remain open. The Occupational Safety and Health Administration (OSHA) has recommended packing plants follow CDC guidelines to protect their workers. Agriculture Secretary Sonny Perdue said last week USDA is working with plants to help them get back online, but USDA has not detailed how exactly it is helping the industry do that.

On Monday, Cargill was forced to shut down a plant in Schuyler, Nebraska, for two weeks. The plant normally processes about 4,500 head of cattle a week. The Centers for Disease Control and Prevention cite that COVID-19 outbreaks have hit at least 115 meat and poultry plants. According to the Food and Environment Reporting Network, more than 6,300 plant workers have become infected and at least 32 have died.

At the same time, calls are increasing for investigations into the price disparity in the cattle markets and industry concentration as well. On Tuesday, 11 state attorneys general called on U.S. Attorney General William Barr and the Department of Justice to investigate market concentration and competition in the cattle industry. The attorneys general cited that live cattle futures prices have hit 18-year lows while the price of boxed beef remains high.

"Given the concentrated market structure of the beef industry, it may be particularly susceptible to market manipulation, particularly during times of food insecurity, such as the current COVID-19 crisis," the letter to Barr stated.

States are not the only ones who have asked the Department of Justice to investigate cattle markets. Several senators last month wrote a similar letter. USDA began investigating cattle markets last summer following a market divergence following a fire at a Tyson plant. USDA has said it is expanding that departmental investigation.

The spotlight on the cattle industry comes as retailers also are increasingly seeking to ration meat supplies. Several major retailers are now curbing purchases of meat. Hy-Vee, an Iowa-based grocery chain with 264 stores in eight states, announced that, effective Wednesday, the company will limit meat purchases at its stores to any combination of four meat packages.

While processors and retailers try to manage a shortage of meat, cattle producers are debating what can be done about their markets. The trend right now is any market shock drops live cattle prices but drives up boxed beef prices. At least some producers believe one of the drivers is the lack of competition among packers.

"Consumer awareness and political awareness right now are at an all-time high, so it is time to do something now if we're going to get it done," said Corbitt Wall, a Texas commercial cattle manager and market analyst for DV Auction. "The timing is right, and I think we have got as good a chance of doing something as we ever have."

Since mid-February, Wall has used his daily YouTube market update, "Feeder Flash," to champion a law change that would require individual cattle packing plants nationally to buy a minimum of 30% of their cattle in the negotiated cash market and those cattle would be delivered to the plant within 14 days, or 30/14 as Wall puts it.

Right now, negotiated cash trade ranges greatly from state to state. Wall said Iowa is at more than 50%, Nebraska is 33%, Kansas is 18%, Texas is 7%, and confidentiality limits reporting figures from Colorado, reflecting low cash trade there.

Wall's plan has grabbed more attention, especially as COVID-19 has further increased the spread between cattle producers and packers. Given the crisis with packers at the moment, cattle producers are open to direct aid, though they're uncomfortable with it, Wall said.

"We would like to have our competitive markets keep guys in business, but we're just not being allowed to do that because our negotiated cash trade, which is so important, has gotten so weak and so manipulated by the packers we don't have any choice at this point," he said.

While advocated by the U.S. Cattlemen's Association, Wall's plan was criticized last month by R-CALF USA, which stated it would lock in 70% captive supply by packers. Meanwhile, the National Cattlemen's Beef Association (NCBA) issued a letter Monday from a Colorado State University college professor declaring his research wasn't meant to mandate negotiated cash markets.

"You're damned if you do, damned if you don't," Wall said. He added, "I don't look to cause any stir with any group, but we have got to do something or we're going to completely lose your cattle industry."

While both R-CALF and NCBA doubt the 30/14 concept with completely opposing positions, each group has responded because some state affiliates for both groups in states such as Iowa, Nebraska and South Dakota support the plan, Wall said. Leaders from the South Dakota Stock Growers Association, for instance, stated last month they would like to see even more cash trade, but support the compromise of 30/14 moving forward.

"Your guys who are paying dues and active in these state associations, they want something to happen and they want to see it," Wall said. "It's getting to the point if we don't do something, your average cow-calf producer or your average backgrounder just aren't going to be able to stay in business."

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

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