Robb says Fed Cattle Markets At Transition For Price DiscoveryTue, 29 Jul 2014 18:45:32 CDT
There are several structural issues that the cattle industry is trying to deal with right now. One of those issues is price discovery. It seems we're seeing fewer and fewer cattle sold on the cash market at the feedlot level. At one time in the southern plains for the Texas Cattle Feeders Association their weekly cash totals were 15 - thousand upwards to 22 - thousand head. Now its more like one thousand, two thousand or maybe three thousand head. Those cash prices are important to help figure formula prices in the feedlot as well.
Livestock Marketing Information Center Director Jim Robb says the industry is in one of those transitions right now.
"Much like when we made the transition from selling in terminal markets to out in the country," Robb said. "We're really at one of those transition points and how it unfolds its really difficult to tell."
"When we push the feed cattle market up to $160, there's not a lot of concern about thin markets and how we are going to set the base price for formula markets," Robb said.
Radio Oklahoma Ag Network Farm News Director Ron Hays recently interviewed Robb at the recent Oklahoma Cattlemen's Association Annual Convention in Midwest City, Okla. Click on the LISTEN Bar at the bottom of this story. Robb said it boils down to two separate issues. Will the industry continue to have a cash market where that market information flows and will the industry have a cash market that is deep enough to set base prices for formula pricing? While these are two different issues, Robb said they remain interrelated. He looks for this topic to come to the attention of the industry when cattle prices drop.
"We lost some momentum on this discussion over the last six or eight months with our record high fed cattle prices," Rob said. "I think it is one of the transitions that the fed cattle industry is going to face and we're going to need some new mechanisms to help in terms of market reporting, but also how were going to set base prices when we formula price animals, which I don't think really is going to go away."
The result is market forces working them out in taking out some of the costs of marketing out of the system. Robb said these are normal transitions that often happen in a marketplace.
"As economists we always want this transaction to happen and we're going to need maybe some new technology that helps us do that over the next five or ten years," Robb said. "There are lots of avenues to help do this and I think its going to unfold, but we're not quite clear how its going to happen yet."
The Beef Buzz is a regular feature heard on radio stations around the region on the Radio Oklahoma Network- but is also a regular audio feature found on this website as well. Click on the LISTEN BAR below for today's show- and check out our archives for older Beef Buzz shows covering the gamut of the beef cattle industry today.
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