Cattle Shippers Track Fuel Shortages and Costs Moving Forward
It's a day-to-day issue, but veteran Georgia cattle producer John Anderson's worry was building last week over whether he would be able to ship out a load of cattle this week, bound for Indiana.
Henderson, who, in addition to being a cattle producer himself, has been a representative for Superior Livestock Auction for 32 years, spoke with DTN on Wednesday, May 12, about concerns of fuel shortages. Widespread hortages were reported across the East Coast and parts of the Southern U.S. last week after Colonial Pipeline, a major fuel supplier to the region, closed on Friday, May 7, following a cyberattack. The pipeline reopened late last week.
Last Wednesday while the pipeline was still closed, Henderson noted: "There's not any diesel fuel around here now. Yesterday (Tuesday, May 11), I started to notice stations were out of gas. It's pretty widespread."
Henderson, whose home base is Rome, Georgia, said he just made a trip to Mississippi last week, and really became aware of the diesel shortage as he headed back. And while the cost of fuel and shortages are worrying, Henderson says the worst-case scenario for any cattle producer would be sending out a load of cattle not knowing if they could make it to their destination. That's something this cattleman says he won't do.
"As of today (Wednesday, May 12), I haven't had to put anything off. But I've got cattle sold to go out of Cullman, Alabama, next week bound for Indiana. We are watching right now to see if we can schedule that. I'd hate to load up some cattle and have them get part of the way and not be able to get fuel again. We're watching this pretty closely. Right now, though, I'm inclined to believe this will be a short-term issue," he said.
Superior Livestock has representatives across the country, and Vice President Joe Lichtie told DTN last week that despite the fuel shortages in some areas, he was not seeing any major transportation issues.
"But I'm watching this, and I'm considering how it might impact us, especially on calves shipping out of the South," Lichtie said. "Right now, most of our calves won't ship 'til summer, but this could be an issue on heavier cattle that might be going now."
Lichtie reported North Carolina representative for Superior Livestock, Will Hargett, who also operates Lancaster Stockyards Inc., relayed to him that urban areas were seeing fuel shortages last week, but shortages hadn't reached into rural areas like his town of Rocky Mount at that point.
PASSING ON PRICE HIKES
Availability aside, fuel prices continued to climb last week. And while the fuel shortages were beginning to ease and prices were starting to stabilize since the Colonial Pipeline reopened, Georgia's Henderson says the rising cost of fuel could well affect prices to producers moving into the summer months.
"Every time fuel costs go up, it comes right back to the producer," said the cattleman. "We always wind up having to absorb everything. If freight is $8 per hundredweight going somewhere, and it goes to $10 per hundredweight, the buyer will bid that much less on cattle. They figure freight before they ever bid."
Looking at that connection between transportation cost and distance, and price paid to producers, Kansas State University recently released a large study showing the differences over an eight-year period.
The study looked at 211 livestock video sales through Superior Livestock Auctions, analyzing the sale of more than 60,000 beef calf and feeder cattle lots. The purpose of the study was to show any impact haul distance had on sale price. The sales went from 2010 to 2018 and grouped distances into short-haul, medium-haul and long-haul.
It is true that long-haul buyers paid less. They assumed a higher risk of illness, possible loss in performance due to stress, and increased fuel costs. The margin of difference over the time period analyzed was between $2 per hundredweight (cwt) and $3/cwt.
For beef calf lots, the study showed in-state buyers paid on average $169.24/cwt and long-haul buyers paid $166.70/cwt. On feeder lots, in-state buyers paid $149.96/cwt, and long-haul buyers paid $148.43/cwt.
Karol Fike, a co-author of the study and faculty member at Kansas State University's Department of Animal Sciences and Industry, said the work let them look at some of the many factors that can affect feeder cattle prices paid.
"This work has allowed us to evaluate the effect of trucking distance on sale price while simultaneously accounting for many other factors that can affect the sale price. This work assists those involved in the beef cattle industry to make informed decisions."
To read more about the Colonial Pipeline shutdown and fuel shortages, go to:
Victoria Myers can be reached at firstname.lastname@example.org
Follow her on Twitter @myersPF
(c) Copyright 2021 DTN, LLC. All rights reserved.