A Breakdown of the Cattle Market Crisis, Let's Get Something Done
By Jim Mundorf
In the past three years there have been events where the beef prices have had a massive increase, while at the same time cattle prices have had a massive decrease. Right now this is happening for what seems to be no reason at all, except for the fact that the corporate beef packers that control the market want it to happen.
On Tuesday night Kansas Cattleman and order buyer Steve Stratford put this video on Facebook explaining where things stand. It has now been shared thousands of times. He gets into the weeds, and all the numbers and lingo can be confusing so I thought I would try to spell it out best I can below.
The cattle market is complicated, which makes it easy for the average consumer and media member to ignore. There’s a lot to swallow down here, and he goes through it awful fast, so I will do my best to break it down.
The backwards math
Steve goes through the math backwards, which is how a cattleman has to do it, when looking at the futures board and figuring out what he needs to make a profit. If you turn what he says around forward it will look like this:
Steve uses the example of a feedyard buying a 950 lb. steer. They will feed the steer until it weighs 1450 lbs. Then they will sell him to a packer to be butchered. In order to know what you can pay for the 950 lb. steer the feedyard has to figure what he will be worth using the Chicago Mercantile Exchange, CME, live cattle futures price. The futures price, is the price that you can contract to sell cattle at a set date in the future. The feedyard also has to figure their cost of gain. Steve conservatively figures this to be $1.30 per lb. (grain prices are increasing daily) meaning they will spend at least $650 to get that animal to 1450 lbs.
According to Steve, with an August fat cattle future price of $1.17 per lb. in order to breakeven on feed costs, (not including costs for facilities, labor, equipment, etc.) you would’ve had to buy that steer at $1.08 per lb. 30 days ago that steer was purchased for between $1.30 and $1.40 per lb. On a 950 lb. steer, that is a loss of between $209 and $330 on one animal. Now multiply that by 100’s or 1,000’s and good luck staying in business. Also, good luck to the guys selling the 950 lb. or lighter cattle that want to get a decent price in the future.
The ass backward market
Now here is the true insanity. While cattle feeders are now losing hundreds of dollars on every animal that they feed. The beef packers are now making hundreds of dollars more on every animal that they buy. This part was for the guys selling cattle to the feedyard. “Your nine weight steer, (900 lb. steer)…that you’ve owned for a year has devalued $30 per hundred, ($30 per 100 lbs. total $270) and the product he turns into has went up $30 per hundred.” Steve goes through the math quick, but the real important part is that on that 1450 lb. steer the packer will soon be making over $1,000 per head. Butchering 600,000 head a week, they will make $600 million dollars in a week $1.2 billion in two weeks.
While the value of animals that make beef tanks, the value of the actual beef is skyrocketing. This is ass backwards. Cattle producers are now, and have been for a while now, operating in a completely fraudulent system.
Four beef packers, Tyson, Cargill, JBS, and National, control over 80% of the cattle market. Both JBS and National are Brazilian owned companies. To understand how these corrupt corporations work together to control the market, please read:
The Bedfellows, how the beef packing cartel is screwing everybody
Beef Checkoff Reform
Every time an animal is sold in the cattle market the seller is required to pay $1 to the Beef Checkoff. The Beef Checkoff, is controlled primarily by the NCBA, National Cattleman’s Beef Association. The NCBA claims to represent both cattlemen and beef packers. While cattlemen are losing money and beef packers are making making record profits, the NCBA lobbies for Government bailouts for the cattlemen while assisting the beef packers in their corruption, and collusion. The checkoff uses the cattle producers money to promote the beef packers product. Beef packers do not pay into the checkoff to have their product promoted, that bill falls solely on the producer. Over the past 6 years there has been absolutely no correlation between the price of beef and the price of cattle. In the past three years the prices have moved in exactly opposite directions. There have been 3 events in the past 3 years where beef prices hit record levels. Holcomb beef plant fire, Corona Virus outbreak, and now for no reason at all. During all three of those times the cattle market has tanked. Just to be clear, in the past three years every single time beef prices have seen a sharp increase, cattle prices have suffered a sharp decrease.
If you raise cattle please sign the petition to reform the beef checkoff at, checkoffvote.com. If you know someone who raises cattle please ask them to sign the petition.
“For God sakes, we’re Cowboys folks, lets grab a spine, grab your balls, let’s get something done”