Shootin' the Bull about rationing producers

“Shootin’ The Bull”

End of Day Market Recap

by Christopher B. Swift

​3/21/2025

Live Cattle:

On-feed Mar 1, 11.577M 98%  30 months in a row of above 11 million head on feed. 

Placed 1.55M 82%

Marketed 1.63M 91%

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In my opinion, the cattle industry, futures traders included, are no longer rationing beef or cattle, but producers.  Whether processing or production, there is too much of both for the number of animals available.  The past 3 weeks, 14 days in a row, cattlemen beat one another over the head to own the most expensive inventory in history in the attempt to remain in the cattle business.  The extreme capital outlay of any time before has been eclipsed by the past 3 week run up. It does not matter much any longer whether hedged, and missing out, or unhedged and assuming all the risk, the price advance is so great that simply not everyone can produce in this environment. The bed appears made, now we see how well cattlemen sleep in it.  I have been able to find a chart that shows Federally inspected processing plants from 1991 to 2021.  In it, it shows the sweeping declines out to approximately 2010.  Then, beef processing begins a steady climb to reach previous levels not seen since around 2000.  I could not find data from 2021 to present, but a belief of the Biden administrations subsidies to increase processing capabilities, it could be closer to levels of 1998.  With a dramatic decline of cattle inventory, there is woefully too much processing capacity.  When coupled with the short kill schedule the past several weeks, it has exposed the issue further as some processors want to be in the business as bad as some cattlemen want to.  The higher box price over the past two weeks will begin to filter into the retail meat case. Since this week is the highest price so far for boxes in this rally, consumers will see a steady rise in beef prices the next two weeks, or the grocer will eat margin, if there is any.  Restaurant patronage is believed to have already turned down with comments from around the US stating how much commerce had slowed in their area.  Restaurants don't tend to eat margin, so expect menu prices to rise with maybe a surcharge on beef like eggs.  Note that when things got even worse for the consumer in egg prices, regulations were laxed, imports increased, and the price of eggs dropped in half.  Most, if not all of the imported eggs will go into processed foods that have an egg product in them. This has allowed for a huge number of domestic supplies to be made available to the public for personal use without the pull from commercial bakers and end users. As the higher price of cattle and beef will encourage alternatives and innovation, one must still look both ways before crossing the street.  The Trump administration helped to facilitate the increase for imports and domestic production in eggs due to public outcry.  While beef may not see a public outcry, the administration can be laxer on certain standards for which have the potential to undermine the current historical price of cattle.  As the US is now a net importer of beef, nothing states they won't continue to increase imports more.  Which will the Trump administration bow to? The cattle producers with prices at record highs, or the consumer believed suffering from inflation.  

Why am I so negative cattle and beef?  I am not negative, I just can see both sides of the equation. I know this is a commodity market, and that supply and demand can be impacted by multiple factors not associated with cattle/beef production, and simply want to make sure that when pushing a heavy cart up a hill, there is someone there to hand you a scotch.  Some contend they prefer to not have a scotch because they think they are too expensive, but we spent the latter part of this week recommending to pull that scotch up as close to the wheels as possible.  Cattle feeders are the ones paying the price and assuming the weight of Atlas.  Whether commercial or farmer/feeder, their decisions on whether to keep bidding product higher or not will have a definitive impact on the price of feeder cattle.  Once on feed they are there, but until then, it seems like some of these critters are making their rounds a couple of times before finally reaching an on-feed description.     

The running of a country like a business is exciting.  As we in business know the frustration of having to live within one's means, while government spending goes unchecked, it is nice to see tax dollars have some form of accountability.  However, this appears a little like an experiment due to not much historical evidence of how well this may work.  With comments by the President stating to be prepared to sell more goods domestically, and an issue with tariffs on whether it impacts cattle/beef more so than the ability of the consumer to pay, we have months to go to see how or if a country can be run like a business.  Energy is believed soft along with grains.  While I do not anticipate a major bear market, a softening of corn and diesel fuel will be viewed as opportunities to book some input costs. From the FOMC meeting this week, it appears the Fed believes the stagnation of inflation will continue, so no rate cuts are foreseen. 

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