Mood in Feedlot Country 'Greatly Improved" According to Ross Wilson of TCFATue, 05 Nov 2013 05:18:24 CST
The Texas Cattle Feeders Association annual meeting is currently underway in Ft. Worth, Texas. Radio Oklahoma Network's Farm Director Ron Hays is there and caught up with TCFA CEO Ross Wilson. Wilson said the mood in the industry this year is greatly improved. (You can listen to their full conversation by clicking on the LISTEN BAR at the bottom of this story.)
"The rains, the grass that has grown this summer and fall has been a Godsend, obviously, and I think it has restored some faith that maybe we are coming out of this drought even if we're not out of it completely-which we're not. We've got grass, we've got some wheat pasture in some areas that's going to be very helpful and then you add to that the really tremendous corn crop that we're harvesting in this country and the decline in corn prices. So, for the first time in probably 2 ½ years for a lot of our members, they're talking about profitability in Q4 and also some profitability into Q1 and Q2 of next year."
Wilson said that feeders are especially pleased with current corn prices near the $4 mark. With high corn prices over the last several years, he said many feeders drastically modified their rations. That might change with the lower prices, but there is still competition in the marketplace due to the needs of ethanol producers, but there may be a modification in the Renewable Fuels Mandate that could lower that demand.
"We've got to pull that subsidized demand back some. We're at 40 to 45, maybe at some point going to 50, but somewhere in that 45 percent range of the entire corn crop is going into biofuels production. If that's what the market drives, that's great, but get the government out of that driver's seat."
Wilson said another issue that is on the top of feeders' minds right now is the mandatory Country of Origin Labeling rule. Though it is currently under review and under litigation in the courts, he said there is really only one long-term solution to putting the issue to rest once and for all.
"Our permanent fix is the statute. We need to fix the statute. That's where the farm bill comes into play. The odds are looking really good." He said there were a number of members of the farm bill conference committee who in their opening remarks before the committee last week said the COOL rule needs to be eliminated.
"It's one of those issues that if the market tells us that what we need to do, and if the consumers are willing to pay for it."
Wilson said his association's members have been following the progress of the farm bill closely and hope that the Senators and Representatives can come to a compromise on the SNAP program funding which seems to be the major sticking point.
"We are optimistic that before the end of the year we will have a farm bill. And today we are optimistic that there will be a resolution to mandatory COOL in that farm bill."
Closer to home, Wilson says that feeders are looking anxiously at the continuing contraction in the packing and feeding industry. He said he doesn't think that contraction is over yet, but the industry may be seeing light at the end of the tunnel.
"The overcapacity of packing and feeding we've seen coming since the cattle inventory peaked in this country in the mid-70s. It's taken a fairly significant toll in this last year with the closure of the Cargill plant. Of course, first, there was the Emporia plant in Emporia, Kansas, and now we have the Cargill plant in Plainview, and, as you note, Cargill will close one of their feed yards in Lockney, Texas, sometime next year. And when you add the other feed yards that have closed as a result of the economic pressures and then this closure of Cargill back in February, there's a few hundred-thousand head of capacity in our part of the country that have come out. Similar things are happening in Kansas. Similar things are happening in eastern Colorado. So, the industry is right-sizing. It is painful. It is very painful to see that go on, but until we get that supply and demand situation on capacity aligned, we'll continue to see that. We hope we're getting close."
Wilson said there is also great concern among his member ship about the price discovery mechanism going forward. With fewer and fewer cattle being sold in negotiated live sales, he said that is an issue that needs more study.
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