Nearly a thousand cattlemen and women met in Wichita, Kansas, for the 107th annual Kansas Livestock Association convention and trade show, Dec. 4 to 6.
Randy Blach, CattleFax chief executive officer, kicked off the Beef Industry University, Dec. 5, telling cattle producers he’d dissected the markets for the CattleFax’s outlook seminar held Dec. 3.
When Blach spoke at the KLA convention in 2018, he discussed African swine fever and what an impact it is expected to have on the markets. They “traded” ASF for the first time during fall 2018. Markets rallied and those with feeder cattle by the spring sold feeders for $1.60.
“That’s why you got to sell feeders at $1.60 was because we traded swine fever,” Blach said. “For those of you who are cattle feeder hedgers, that’s why you got to sell June cattle up in here on top of $1.20.”
The margins in the market didn’t have anything to do with the livestock markets, he said. “It was money.”
“I want to make sure that we connect some of these dots. We can get all wrapped up in all of these numbers in here—supply, demand, inventory,” Blach said. “Those are still huge. But one of the things that I’ve learned in my near 40-year career at CattleFax is you better have an open mind because these markets are changing and they are changing rapidly.”
Ten years go, Blach told people at their outlook seminar to have new market fundamentals on the radar screen, particularly “how these funds trade our markets, how they trade and learn to harness that. Because what it does is it creates more opportunities.”
“Now what you’ve seen in the year over the course of the last year is pretty phenomenal,” Blach said.
Looking back at how the markets traded, in late April, cattle markets pushed upward, with some fed cattle up to $1.20 and pushing $1.30 in Nebraska.
“And the markets changed in, boom, six weeks. In six and a half weeks we had a $16 break in the futures,” Blach said. “Did that create an opportunity?”
It did create opportunity for those people who were hedged and had a strong basis. For them it was a positive situation.
“But it also created an opportunity on the buy side for those of you who were stocker operators,” Blach said.
There were three opportunities this year for those hedging, he said.
“We had a $16 break in April. We had the (Tyson) fire on Aug. 9. We turned around, we follow that up with another $16 break. And are just in the process of finishing up a $20 rally in Sept. 9 to right now,” Blach said. “That’s a lot of volatility isn’t it? And think about what that means to our businesses.”
Blach said for bankers, how much volatility can they stand? How much risk and stand up in the market?
“Doing it the way we did it 20 and 30 years ago—being wide open all the time—in my opinion, I would say good luck. Because that is not a very good plan,” he said. “Hope is not a good strategy.”
Especially when there are outside things like African swine fever influencing the markets and conversation between traders.
“We got half the hogs in China are dead. Half of them are gone,” Blach said. “Does everybody understand what that means? That’s 10% of the world’s meat supply is gone. Ten percent.”
There’s not enough meat protein in the world available to fill that void. Lean beef traders and the subsequent lean beef value has a huge influence on the value of a market cow. Blach said lean beef markets have gone from $2 to $3 per pound in places.
“Now it hasn’t gotten quite that high in the U.S., but the global market, the global price of lean, is $3 a pound,” he said. “So these markets are starting to move now and I would just say you need to really be on your game. You really need to stay plugged in.”
Quite honestly, looking back at 2019, Blach isn’t very surprised with anything he saw.
“I thought the market was pretty darn predictable. The supply side was predictable. The slaughter was within 20,000 head of what we thought it would be for the year,” Blach said. “We under harvested a little bit because of the fire.”
Production levels weren’t off very much, and grain prices haven’t changed very much either.
“The swings, the price ranges that we had through the course of the year were pretty predictable,” he said. “Am I as confident of that as I look at 2020? Probably not because of the dynamics with swine fever.”
Watch for more from Blach’s session in an upcoming issue of the High Plains Journal.
Sustainability
Sara Place also had a session at the convention, speaking about the sustainability of the U.S. beef cattle herd. Place is Elanco Animal Health technical consultant in Sustainability. There’s been a lot of talk about plant-based proteins and how they’re more sustainable. Place disagrees.
“I would argue we’re in this weird situation where we have people arguing and ruminants aren’t sustainable,” she said. “And you can argue they’re probably the most sustainable thing that we have in agriculture, right? Because they’re making something from nothing.”
Ruminants are able to take their “technology” and convert human inedible plants and make high quality, nutrient-packed protein out of it.
“It’s taking all that solar energy and those human inedible plants and making a higher quality product,” she said. “So how many of us think about beef as a solar energy product? Probably not too many of us, but that’s what it is.”
Beef animals are mobile too, harvest the plants without burning fossil fuels, and produce a high quality organic fertilizer that feeds the soil. It self-replicates as well.
“We’re the original plant-based protein. We’re already doing that,” Place said. “I think that’s one of those things about talking about how do you connect to the consumers.
The gap in perception versus reality is where the plant-based alternatives are exploiting, Place said.
“If you look at how they market their products, and for the few of you that have eaten them, right, you know that the eating experience really isn’t there,” she said. “They’re trying to say, well, we’re kind of as good as beef, but you don’t want to feel guilty about it.”
There’s a fear of fat in food, and now the perception beef isn’t sustainable or ethical.
“That’s just the reality. It’s kind of harsh. But that’s what’s driving this market opportunity for these plant based proteins, in my opinion, more than obviously, their product quality,” Place said. “So that’s why I think it’s so important to pay attention to this right now because leaving that barn door open and allowing these companies to actually have a business because of that perception. That’s our failure for not filling that. So we need to shut that door.”
Outgoing president enjoyed term
One of those people helping with the perception of Kansas beef is outgoing KLA president, Barb Downey. The Wabaunsee County cow-calf operator has finished her term as president, and for her the thing that stuck out the most is her interaction with individual producers.
“The things that I think are so important are that contact with individual producers, making sure that everyone knows this is our organization,” she said. “This is not the KLA. This is our KLA, and that it does indeed take all of us doing, doing what we do bringing our individual knowledge and experience to the table.”
Downey said when developing policy, the face-to-face interaction is important.
“When you’re asking lobbyists to make your case on your behalf at the statehouse, they need to have a really well formed policy in place with everybody’s experiences forming that policy,” Downey said. “So we’ve got to have all of us at the table.”
Downey said producers need to have face-to-face time with legislators.
“They need to see you in their office and have that one-on-one conversation about how important an issue is to you,” she said. “We sat there with one of our Kansas legislators who had never heard the figure of $325 per head, per beef because of exports. And that really brings it home how important these trade agreements are.”
Watch for more information from the convention in upcoming issues of the High Plains Journal and online at www.hpj.com.
Kylene Scott can be reached at 620-227-1804 or [email protected].
