Sort & Cull

The Super Bowl of Tug O' Wars

John Harrington
By  John Harrington , DTN Livestock Analyst

Don't ask me why, but I was glad to see the Ravens walk away with the big trophy last Sunday. It's not like we have a long, emotional history.

Actually, the last time I put Baltimore and football into a single thought, Johnny Unitas had just told Raymond Berry to go deep.

My wife wanted to watch the Super Bowl for the ads, so I just picked a team to cheer for on the spot. Maybe I'm just an "underdog" kind of guy.

Despite my apathy and secret longing for Downton Abbey, I thought it was an exciting contest with momentum going back and forth throughout the four quarters.

Yet when there was no time left on the clock, I performed a sad little victory dance on my post-game trip to the bathroom. Sometimes there's nothing sweeter than dumb luck.

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But the truth is I just wanted a definite winner. The game-watching eyes strained at work were getting pretty sore.

Since 2013 began, the fed cattle market has been trapped in the football equivalent of sudden death overtime with producers and packers wailing on each other without ever moving the chains.

The cash round completed Friday afternoon was just the latest version of a ground hog day from hell. While feedlot asking prices and leverage seem fully justified in terms of historical tight ready supplies, the lower bids and defensiveness by packers are completely understandable in the face of sagging beef cut-outs and gut-wrenching margins.

While gridiron warriors can admire and even enjoy the spectacle of keen competition, I guarantee no one is having fun between these goalposts.

A pattern of "four-and-out" that persists for month after month can be incredibly frustrating. But when such a marketing stalemate means that both sides loses $100-plus per head each time the ball is snapped, the line between market monotony and destructive economic quickly fades.

You can bet that Cargill's decision to pull the plug at its Plainview plant was at least partially based on avoiding this nasty slugfest between inadequate cattle supplies on one hand and inadequate beef demand on the other.

Seasonality should soon swing more in the favor of cattle feeders: Product demand typically improves over the next three months, and fed offerings seem set to remain historically small through the second quarter.

Unfortunately, better leverage in this regard may not lead to feeding profits -- perhaps only smaller losses.

Denied a significant burst in beef demand, about the only way packers can command greater leverage in the foreseeable future is by the further reduction of chain speed and/or kill capacity.

Yes, if this brutal match of tug o' war continues and even intensifies, another plant closing is a real possibility sometime down the road.

For more John Harrington comments, see http://www.feelofthemarket.com/…

(AG)

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Comments

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gregory schimkat
2/19/2013 | 10:49 AM CST
I've been waiting for the proper forum to express my opinion about Downton Abbey. No better place than John Harrington's column (he brought it up). I too have been roped into watching the show and now enjoy it. My Point: In this period of class warfare, could this show have been subsidized by the Koch Brothers to make aristocracy appear (kinda) lovable?