CALF_News_December_2020_January_2021

24 CALF News • December 2020 | January 2021 • www.calfnews.net Texas Cattle Feeders Convention Negotiated Cash Sales, Other Hot Issues Examined in Virtual Setting By Larry Stalcup Contributing Editor W ith the apparent election of Democrat Joe Biden as president, some cattle feeders and producers hope they don’t face excessive government involvement in their business. But despite what may happen under a new administration, there remain concerns about cattle markets and the potential for more government requirements for negotiated cash sales to packers. Some are warning producers and feeders to beware of major government mandates designed to increase the percentage of negotiated cash sales as opposed to grid or formula sales that help provide higher premiums for higher quality cattle. Among those who caution against too much government involvement is Randy Blach, CattleFax CEO. Blach was among speakers at the annual Texas Cattle Feeders Association (TCFA) Convention this fall. The virtual convention also featured a farewell address by outgoing U.S. Rep. Mike Con- away (R-Texas) and former chair- man of the House Agriculture Committee, who also touched on government’s role in controlling cattle prices. Other speakers included outgo- ing TCFA chairman Paul Defoor, University of California, Davis, Professor Frank Mitloehner, who has continuously set the world straight on the value of cattle to the ecosystem, and geopolitical futurist Peter Zeihan. Price discovery and transparency have long been an issue. Blach noted that the percentage of negotiated cash prices has shrunk tremendously in Southern Plains feedyards in Texas, Oklahoma and southwest Kansas. For 2020, cash pricing has accounted for only about 14 percent of sales in the southern feeding areas, while 86 percent of cattle were sold on a grid or formula. It’s much higher in the Midwest. But still a large portion of finished cattle are sold based on a grid or formula that rewards higher quality cattle with a premium price. Proponents of mandated cash pricing believe packers have taken huge profits while holding down cash and even grid prices. That attitude hit the fan after the Tyson Holcomb, Kan., packing plant fire in southwest Kansas – and especially during the springtime market crash caused by COVID-19. There have been government proposals to require 30 percent or 50 percent of cattle be cash priced. The so-called “50-14” proposal would require major packers to buy 50 percent of their cattle on a cash basis with delivery within 14 days. Another recent proposal by Sen. Deb Fisher (R-Neb.) is the Cattle Market Transparency Act. The legislation is designed to restore transparency and accountability to the cattle market by establishing regional negotiated cash minimums and equipping producers with more market information. NCBA indicated that the bill “explores many avenues to improve transparency. The creation of a cattle contracts library and clarification of confidentiality rules will provide crucial data to producers as they seek to make informed marketing decisions.” However, NCBA and cattle groups like TCFA still want a voluntary process.“Our policy dictates that the voluntary frame- work we are developing be allowed the opportunity to succeed or fail before we can lend our support to regional mandatory minimums for negotiated trade,” NCBA declared. Blach said, despite efforts to generate more cash sales, the mandatory option could create government intervention that’s here to stay.“There are industry efforts to promote more cash sales,” he said.“But if you invite the government in to fix the problem, the risk management tools you enjoy now are not going to work. That would set us back a decade. We need a dynamic market in which risk management tools will work.” Rep. Conaway also warned of government help that could become a long-term hindrance.“If you ask the federal government to help market your cattle – they will,” he said.“They will write the rules and they will enforce them. It is a two-edge sword.” 2021 Price Projections Blach said producer and feeder profit margins would remain tight for 2021. CattleFax predicts fed steer prices in 2021 will range from $105 to $125/cwt., with an average of $115. The price for 750-lb. feeder steers is pegged at $140 to $160, with an average of $145. The CattleFax forecast for 550-lb. steer calves is $155 to $180, with an average of $166. The CattleFax projection for utility cows is from $50 to $70/ cwt., with an average of $61. All fresh retail prices are forecast to range from $5.85 to $6.15/lb., with an average of $6. The composite cutout is projected at $195 to $240/cwt., with an average of $220. Blach stressed that consumer beef demand has remained strong through COVID, despite the forced closure of many food service entities.“Markets have done a good job of absorbing the hit from no food service business caused by COVID [shutdowns],” Blach said.“Retailers and their ‘hot features’ have done a wonderful job of driving consumers back into their stores. “There were only three weeks this entire year where beef demand was below what it was a year ago. Consumers want a high-quality product. Once they get a taste for it, they are will- ing to pay for it.” Harvest capacity has slowly increased to near pre-COVID levels. The daily harvest capacity went from 100,000 head pre- COVID to 55,000 in the spring. In October, those numbers had climbed back to 93,000 to 96,000.“Since June 15, Saturday CattleFax CEO Randy Blach