The cattle market is at a critical crossroads. The rift between producers and packers has been widening, fueled by rising packer margins and declining cattle prices.
Rabobank senior analyst Don Close says a recent RaboResearch report has compiled data to compare all cattle market transactions on an apples-to-apples basis. “We put all transaction types on a cash equivalent basis,” he says. “That enabled us to take the price series of all transaction types on a cash basis, overlay those prices, and the big disparity between the transaction types is not there.”
He tells Brownfield the price imbalance in the cattle markets is driven by the lack of leverage in the industry. “We simply do not have an adequate amount of slaughter capacity at this time to handle the supply of fed cattle that we have had,” he says. “And that is what is causing the real imbalance in prices between cutout values and live cattle.”
Close says their research shows slaughter capacity needs to increase between 4,000 and 5,000 head per day.
