Welcome to the Friday edition of the HOT BARN REPORT
Heard ONLY on American radio stations across the nation and online at hotbarnreport.com!
Karina Jones, Field Director for R-Calf USA joins us each Friday from her ranch in the heart of Nebraska covering what’s new and important to the family farm and ranch.
Throw the confetti fat cattle are over $1.45! Thanks for tuning in to this Friday edition of Hot Barn Report.
It has been fascinating to me to watch certain ag media and economists throwing a party over these fat cattle prices. I guess when that is your job, to report markets, it could be exciting. But, let’s get back to the real world.
The USDA High Plains Cattle Feeding Simulator has the cost of gain for feeders bought in January and slaughtered in May as $1.19 a pound, but they are figuring corn at $6.72 a bushel and if you can find corn for that right now, let me know, I’m in the market. So even with those underwhelming expenses that is a NEGATIVE Net Margin of around -$5 a head. Oh goodie, sounds like something to celebrate, eh? What the USDA notes in their chart is the costs they include are variable, so I reached out to a couple of independent feedlot owners that have to buy the feed that goes in the bunk, the fuel that goes in the tractors, and balance the books every week. Reports I am getting from these feedlot owners are COG is more in the range of $1.35 for conventional steers and upwards of $1.50 for all naturals and heifers. So, now imagine the negative margin using those COGs reported by real feedlot owners.
I don’t think you or I need a scientific calculator to deduce that $1.45 fat cattle are not going to pay the bills. Here’s the deal, the industry doesn’t want to get rid of the cow calf man, they need the calves.
The independent feeder who competes for cattle with the sweetheart guys is the one with the bullseye on his back. $8 corn speeds up their extinction. The last of independent guys can’t compete with the cost plus boys. And I assure you, cow/calf producer, like most of you listening and myself, are gonna miss these Nebraska and Iowa feeders in the barns this fall.
These independent feedlots are not trying to make money, they are trying to make money back…those who don’t live it forget that the potholes of the past balance sheets have to be filled at some point.
So, now we look to next week when the Senate Ag Committee has scheduled S. 4030, that compromise bill you have heard me talk about, for mark up. And you wonder why the cattle industry and feeders are so underwhelmed and nauseous about it? Because it can memorialize the lackluster negotiated cash participation of 2020 & 2021. Not much to celebrate there, right?!?! This is the Senate Ag Committees time to take all they have heard from the hearings and the academic studies that have brought forth valuable information confirming that our cattle market structure is dangerously concentrated and showing no signs of a free and fair market and amend this bill so that it actually provides valuable cattle industry reforms instead a weak attempt and a lot of busy work for the USDA, that really wont amount to much of any change that will benefit rural America.
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