I am happy to see some encouraging signs of trend changes in the industry of late. The first one is the weather. There has been a rather significant amount of rainfall in the past month centered predominately in Southeast Kansas, as well as rather impressive totals here in Western Kansas. This could lead to a greater amount of grazing cattle this fall, something that has been in a large decline since 2010. With the national cow herd at a 50 year low, that is very good news. Keep in mind, though, a build up will take time – probably a minimum of at least 3 years and that’s just speculating. Nonetheless, this is a step in the right direction.
With the decline in the price of new crop grain, cattle feeders should be looking at some relief. However, with the late maturity of U.S. planted crops, that relief realistically won’t arrive until mid-November. With that said, I’m a little surprised at the recent run-up in cash feeder cattle values! The actual cost of gains needs to be carefully evaluated, based on the late growing season we are experiencing. It seems to me at least one-half of the next feeding period will consist of old crop corn and if we would suffer an early frost or freeze, well then Katy bar the door!*
Tyson’s announcement last week of its ban on Zilmax seems to have been bullish, at least initially, but with no follow up support from the other large beef packers, I doubt there will be any long term positive effects for the industry. Packer margins look much worse on paper than they did a month ago, so let’s hope for an increase in both domestic and international demand. We will need this demand to make the current turn of cattle we have on feed profitable.
*For those who are wondering, “Who is Katy?” “Katy bar the door” is a colloquial expression meaning “look out” or “get ready for trouble.”