Cattlemen Examining Options in Light of Pricing Volatility

AMES, IA – With prices received by cattlemen falling dramatically over the past few months, the National Farmers Organization (NFO) says the country’s cattle producers deserve a more modern and competitive cattle pricing system. Prices received in mid-June collapsed after a fire at a Tyson meat processing facility in Holcomb, Kan., while packer profits skyrocketed. About 15 percent of cattle nationally are sold in the cash market, making it very difficult to establish accurate and fair pricing, NFO explains. The remaining 85 percent is sold under some form of captive supply. NFO is suggesting an alternate pricing approach that could be based on a blend of average spot cash prices, nearby weekly cattle futures, and the weekly beef cutout value. During a recent producer meeting in Omaha, hosted by the Organization for Competitive Markets (OCM), producers said they were losing more than $200 per head, while packer margins were more than $400 in August. The National Cattlemen’s Beef Association (NCBA) adds that these producers have every right to be angry: down markets are horrible and can leave a wake of financial and operational hardships that can persist for years after the boards in Chicago have moved on. NCBA asked Agriculture Secretary Sonny Perdue to investigate the events surrounding a recent fire at a packing plant in Holcomb, KS. With boxed beef prices turning higher, many cattlemen are raising their asking prices to $112 per hundredweight, leaving packers wary of chasing the offers explains The Cattle Report, an online livestock newsletter. The carcass weights fell last week and serve as a reminder that fed supplies are not backing up and with the re-opening of the Tyson plant in clear sight, light late spring placements may turn the leverage with cattle prices staging a strong rally into the end of the year.