If you have been reading my articles, or really any ag trade publication from the US lately, you know that beef is entering crisis mode.
This was exacerbated on 9 August by a large fire at a Tyson packing facility in Kansas, which slaughters 6,000 head per day.
Immediately, cattle futures locked limit down for three days and our already depressed market lost another 10% of value. The Chicago Mercantile Exchange can only trade a certain value before it is ‘locked’ to a limit in an excessive single day move.
This is a critical time because spring calves are heading to markets now. Obviously, a down market when hardly any animals are selling is a different beast to a down market with heavy volume.
So the little guy in the country is slowly having the blood drained out of him, but what about the packers?
Not only did they immediately pull their bids from the market to completely to let it fall, but the story is that they immediately hyped the plant-burning to their wholesale grocer customers and raised the price of beef by nearly 10%.
They are making nearly $500 per head at the moment. We have faced a huge amount of market consolidation in the past two decades, so although there are some regional packers, four companies basically control the whole industry.
You’d think that it would be a huge problem losing the plant. It has issues obviously, but all they did was turn up their other plants and the net result is we are having daily kills that are nearly what they were a week ago.
People are saying it’s sanctioned collusion and price fixing at the expense of rural America.
I went to a livestock meeting yesterday (because despite this not being on the programme, everyone and their dog knew it would hijack all the talk) and it was interesting.
This bad market feels different to bad markets in the past. This time the greedy players overplayed their hand, it seems.
I’m not sure what will come of it but I hope it is profound.
Daniel Mushrush is a Farmer Focus writer from Kansas. Read his biography.