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Processed Beef Price Increased but Live Cattle Decreased?

By Lee Schulz

Question:
What could cause live cattle prices, that is the price paid for cattle on the hoof, to plummet, suddenly, when numbers have not increased substantially, (we were in a herd building mode following a drought), but boxed prices are at an all time high. Packers are receiving huge net profits, ($1300 per head)while ranchers are losing money. ($350 per head). Cattle-Fax and other statistics gathering reporting and marketing services predicted that cattle prices would remain high throughout the herd rebuilding phase of the cattle cycle, about 3 years. But, suddenly, and without warning, cattle prices crashed, August 2015, There was not a crash in the general economy. Live cattle are traded on the futures market, Chicago Board of Exchange. The U.S. does engage in exporting and importing of beef. Secondly, because of a fire in a processing plant, and the COVID19 pandemic, the problems in the cattle industry have come to the attention of the federal govt. because of food security issues.

What measures can be taken to keep the cattle industry in the U.S. from imploding? What can prevent vertical integration from further occurring? How can the American farmers and ranchers be kept from bankruptcy, (without gov’t subsidies or handouts) making sure that private ownership of land persists? What kind of market manipulation could cause all this?

Answer:
Here are several resources that begin to address many of your questions.

Beef Marketing Margins - http://jaysonlusk.com/blog/2020/5/4/beef-marketing-margins

The Economic of Packing Plant Fires and Cattle Prices - http://jaysonlusk.com/blog/2019/8/20/the-economic-of-packing-plant-fires-and-cattle-prices

Long-term strategies are needed to keep the nation’s meatpacking plants open and its food supply chain moving - https://www.city-journal.org/closing-meatpacking-plants-food-supply-chain?utm_source=Twitter&utm_medium=Organic_Social

COW/CALF CORNER Be careful what you ask for - http://oklahomafarmreport.com/wire/news/2020/04/00001_cowcalfpeel04272020_092651.php#.XrwwRMB7mUk

Evaluating the Farmer's-Share-of-the-Retail-Dollar Statistic - https://www.jstor.org/stable/41548411?seq=1#metadata_info_tab_contents

Fed Cattle Market Regional Comparisons - http://www2.econ.iastate.edu/ifo/files/ifo2015/ifo110115.pdf

Source : iastate.edu