What's happening to our cattle industry? (health insurance, employment, buyers)

[Walter Greenspan]

Let's take a look at what prices are right now for live cattle (1100 lb. slaughter animal) and feeder cattle (600 lb. feeder animal):

As of Friday's, September 17, close:

Nearby live cattle = $99.40 per cwt.
This is just below the year's April/May high price, and up about $10.00 from the July price, and about $15.00 higher than a year ago.

Nearby feeder cattle = $111.83 per cwt.
This is about $5.00 below the August high price, and about $20.00 higher than a year ago.


Now, looking at the 6-month feeding margin (gross operating margin) for buying an October 2010 feeder cattle ($111.85) and selling an April 2011 live cattle ($104.25):

April 2011 live cattle @ $104.25 X 11 = $1,147
October 2010 feeder cattle @ $111.85 X 6 = $671
October 2010 to April 2011 feeding margin = $476

The $476 feeding margin is per animal and has to cover feed, medicine, other operating costs, overhead, etc., etc., etc., and profits.


Anyone can easily monitor the live cattle and feeder cattle futures prices on the Chicago Mercantile Exchange (because these prices are available at no charge, they come with a 30-minute delay) by going to:

Live Cattle futures prices

Feeder Cattle futures prices

And, in case you would like to see them, here's Lean Hog futures prices

[marmac]

Originally Posted by ElkHunter

It's just like anything else. The big packers are going to be a guarenteed price and take good with the bad. The local packers are going to buy nothing but good stuff and then it's going to be now and then. They can actually truck them to get a solid price and make more money then what they make off the locals.

We have a packer about 8 miles from me. Small operation, they employ about 15 people and then take on extra help during hunting season. The kind of operation you'd find anywhere, 30 years ago. They butcher for local ranchers for their own freezers. Bigger ranches might bring in a dozen head to be cut up for their ranch hands and leave one for the butcher. He cuts it up and sells to the local mom&pop stores. The little store I buy my meat at get's it from him. I can pick up pork loin chops and inch thick and 4-5 inches long. 3 per pack for less then $5. Wally World in town gets $8 or $9 for the same thing. I can get burger for $2.99 a pound. But it's so lean you almost have to add oil to keep it from sticking.

In Sheridan, there was 1 mom&pop grocer that had outstanding meat. Not sure where they got it, but it was local. They sold out early this year. Bunch of people were pissed. The rest of the grocers are Safeway, Wal-Mart, Albertson, etc... so they're trucking beef thousands of miles before it gets to their stores.

Used to be a big packing plant down in Rapid City, but years ago they caught fire and never did rebuild. But, the city had grown around them and all the newbies complained about the noise and smell so I would imagine it just wasn't cost effective nor worth the hassle of rebuilding. I think they just gave up.

Edit - Forgot to mention. Years ago, the buyers for Morrel, Hormel and such, sat in the livestock barn right along side of you. They traveled from sale to sale and bought a few at each. Kept all the salebarns busy, kept the local small farms and ranches busy with sales. (I know, used to drive truck and had to pick up 4 or 5 at each salebarn and take to a feedlot East of Rapid City). But now days, the buyer goes to the ranch in many cases. They won't even stop at a small spread that only has 150 cows. And then they contract to buy.

--the city had grown around them--

Yup, same thing happened to the Minnesota packing plant where I worked.

We did 800 head a day.

Another packing plant 2 blocks away did 1,000 head a day.

The ground they set on is now a college parking lot.

[marmac]

The problem with packing plants is you have a high turn over of labor.

When a packing plant starts up in a rural area, you will soon use up the available labor force in that area.

What comes next?-----------influx of ILLEGALS

Be carefull what you wish for !

[Walter Greenspan]

From the USDA Market News, Estimated Daily Livestock Slaughter under Federal Inspection:

.......................................CATTLE...CA LVES...HOGS......SHEEP
Friday 09/17/2010 (est).......126,000 ...4,000....405,000.....7,000
Week ago (est) .................130,000 ...4,000....409,000.....8,000
Year ago (act) ..................124,000....4,000....424,000..... 8,000
Week to date (est) ............645,000...17,000 2,059,000....42,000
Same Period Last Week (est)526,000...15,000 1,668,000....38,000
Same Period Last Year (act)618,000....19,000 2,140,000....49,000

[marmac]

Originally Posted by ElkHunter

It's just like anything else. The big packers are going to be a guarenteed price and take good with the bad. The local packers are going to buy nothing but good stuff and then it's going to be now and then. They can actually truck them to get a solid price and make more money then what they make off the locals.

We have a packer about 8 miles from me. Small operation, they employ about 15 people and then take on extra help during hunting season. The kind of operation you'd find anywhere, 30 years ago. They butcher for local ranchers for their own freezers. Bigger ranches might bring in a dozen head to be cut up for their ranch hands and leave one for the butcher. He cuts it up and sells to the local mom&pop stores. The little store I buy my meat at get's it from him. I can pick up pork loin chops and inch thick and 4-5 inches long. 3 per pack for less then $5. Wally World in town gets $8 or $9 for the same thing. I can get burger for $2.99 a pound. But it's so lean you almost have to add oil to keep it from sticking.

In Sheridan, there was 1 mom&pop grocer that had outstanding meat. Not sure where they got it, but it was local. They sold out early this year. Bunch of people were pissed. The rest of the grocers are Safeway, Wal-Mart, Albertson, etc... so they're trucking beef thousands of miles before it gets to their stores.

Used to be a big packing plant down in Rapid City, but years ago they caught fire and never did rebuild. But, the city had grown around them and all the newbies complained about the noise and smell so I would imagine it just wasn't cost effective nor worth the hassle of rebuilding. I think they just gave up.

Edit - Forgot to mention. Years ago, the buyers for Morrel, Hormel and such, sat in the livestock barn right along side of you. They traveled from sale to sale and bought a few at each. Kept all the salebarns busy, kept the local small farms and ranches busy with sales. (I know, used to drive truck and had to pick up 4 or 5 at each salebarn and take to a feedlot East of Rapid City). But now days, the buyer goes to the ranch in many cases. They won't even stop at a small spread that only has 150 cows. And then they contract to buy.

---We have a packer about 8 miles from me---

I sure wouldn't call that a "packer' when they only do custom butchering for ranchers and alsp process deer.

Sounds more like a bucher shop or meat locker.

Most people consider a packing plant one that buys cattle from a rancher and ships the finished product to a buyer.

[ElkHunter]

Originally Posted by marmac

---We have a packer about 8 miles from me---

I sure wouldn't call that a "packer' when they only do custom butchering for ranchers and alsp process deer.

Sounds more like a bucher shop or meat locker.

Most people consider a packing plant one that buys cattle from a rancher and ships the finished product to a buyer.

You call it what you want. Here, he's a LICENSED Meat Packer.

[Reziac]

Originally Posted by marmac

The problem with packing plants is you have a high turn over of labor.

When a packing plant starts up in a rural area, you will soon use up the available labor force in that area.

What comes next?-----------influx of ILLEGALS

Be carefull what you wish for !

I'd rather have INS raiding the place regularly (remember, you don't get illegals working anywhere without the employer being complicit) than have no ranches left and no jobs, and all our meat coming from gods know where.

And in today's job market, you're not going to run out of legal labour any time soon. There are too many people hurting for honest work. The only way to kill that is to make it too expensive to hire anyone legally:

I heard about a minor bit of vigilante work that apparently did wonders for getting rid of illegal labour, mind you this is CA where it flourishes not so much because the warm bodies are here, but rather because it's so damned expensive to hire someone legally (for every $1 you pay in wages, you cough up another $3 in other crap the state requires you to pay, but the illegals will work for cash with no benefits): Every day for a week, a guy walked onto a construction site and yelled "Immigration! Everyone show your green cards!" And all the workers immediately vanished for the day. So no work got done. This eventually gets to be more costly than hiring legal workers....

[Reziac]

Originally Posted by Walter Greenspan

Let's take a look at what prices are right now for live cattle (1100 lb. slaughter animal) and feeder cattle (600 lb. feeder animal):

Yep. But that increased production is going to other states. Montana is losing cattle production at the 2nd highest rate in the entire nation.

Also, if you compare prices across the past 20 years, you'll note that the price of beef on the hoof has been fairly static -- yet the price of fuel and fodder (the two main expenses) have tripled over the same period. So even if prices for live cattle are slightly higher this year, they're still WAY behind both inflation and the rise in production costs.

I think that may be driving the out of state feedlots more than anything else -- the cost to ship in the feed required to finish those calves far exceeds the cost of shipping the calves back and forth, and MT doesn't produce enough fodder anymore to handle it locally. Crops require water and nitrogen (the two limiting factors on crop production) and in recent years, both have been either in short supply or too danged expensive.

So maybe we need to look one step further back, at where the feed is being produced, how that can be improved locally, and what's actually necessary to finish those calves to a marketable carcass condition. Because grass-finished doesn't cut it in today's market (and frankly, corn-finished beef tastes better).

[marmac]

I think you missed the part I posted about packing plants having a high turnover of labor .

I have yet to see a packing plant.turkey processing plant,or chicken processing plant that didn't rely on illegals to fill their roster.

In a "perfect world" of supply and demand, the packing plant would locate to a rural area and hire and train locals. If they exhausted the local labor force , they would raise wages in hopes of legal workers re-locating from other areas.

That is so rare in the packing plant industry that my scenario would be considered a fairy tale.

Why doesn't Montana have packing plants?

Here is my guess--------rich Jews ( yup, Jews love to run packing plants) have concluded that it is not profitable to start up a packing plant in Montana.

Jews are very good businessmen and if they thought it would be profitable, they would be building one as we speak.

[Reziac]

Originally Posted by ElkHunter

Years ago, the buyers for Morrel, Hormel and such, sat in the livestock barn right along side of you. They traveled from sale to sale and bought a few at each. Kept all the salebarns busy, kept the local small farms and ranches busy with sales. (I know, used to drive truck and had to pick up 4 or 5 at each salebarn and take to a feedlot East of Rapid City). But now days, the buyer goes to the ranch in many cases. They won't even stop at a small spread that only has 150 cows. And then they contract to buy.

So that small producer, which there are a lot more of numerically than there are of the big ones, is liable to have trouble even getting his cows to market. Seems like that ought to be opportunity for the old way of doing things to make a comeback from the ground up.

I'd guess the big hangup there is that the old infrastructure (the sale barns, the feedlots, etc.) has been demolished, so startup costs could be prohibitive. There again that's where some help from a local cattlemen's association just might be the critical factor that helps it get going.