Harrington's Sort & Cull

Uncle Schadenfreude

John Harrington
By  John Harrington , DTN Livestock Analyst

Most families have an Uncle Schadenfreude. You may call your grumpy and perpetual naysaying relative by some other name. But it's all the same.

He's the guy who can't wait to tell you about who's in the obituaries, who's just been diagnosed with incurable cancer, and who's in trouble with his banker. Nothing seems to please this professional bearer of bad news more than to interrupt a somber conversation with even grimmer details and darker observations of woe.

And if you plan to get home before midnight feeling less than suicidal, never, never ask his about his own health or what he thinks of the market.

I'm sure you are painfully aware of the type. Please believe me when I say there's not a washout road, a lava-soaked exit, or a condemned mountain bridge I would avoid in order to dodge one of these gleeful prophets of doom.

Such a disclaimer seems necessary given what I'm about to say about the cattle market. After watching the cash trade implode by nearly $15 since mid-May, the last thing feedlot managers want to hear is more sad violin music.

While I feel their pain, successful management absolutely requires open eyes and ears even through the toughest of times. So at the risk of drawing a flag for "piling on", here are three developments that could conceivably make a bad market worse:

1) Carcass weights have probably put in a seasonal bottom and are now set to work higher through the balance of 2018. The year's lightest scale tickets are typically printed in mid/late May, and the latest slaughter report released on Thursday (for the week ending May 12) indicated that the size of railed heifers has jumped by 5 pounds.

2) Regardless what happens in terms of nursing a trade war truce, U.S. beef export could be stuck on a slow boat to China for years to come. Far beyond tariff speed bumps, China has zero tolerance on the use of growth promoter beta-agonist ractopamine and synthetic hormones used in U.S. beef. Additionally, the beef order from China stipulates age and origin specs that compound the challenge of sourcing for U.S. producers.

3) Cattle feeders continue to aggressively load the cannons of production. Even though April placement activity fell 8% short of 2017, it still towered 15% over the three-year average. Furthermore, the front-end feedlot population will surely require weekly chain speed of 650,000 to 660,000 from now through mid-July. Such aggressive scheduling could repeating bang the ceiling of total slaughter capacity, absolutely requiring week after week of large Saturday kills.

Here's hoping I haven't become your new Uncle Schadenfreude. Trust me, I take no pleasure in promoting extra stress and anxiety for anyone brave enough to make a living in this tough biz.

Maybe I just believe that forewarned is forearmed.

John Harrington can be reached at harringtonsfotm@gmail.com

Follow him on Twitter @feelofthemarket

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