COVID-19 Market Factors Still in Play for Producers
By Jeff Rose
What a difference a couple of months can make. Last time I penned this article we were wondering how high the market could go. Now, of course we’re wondering if it can get back to the level it was then, the hope marketing phase. I don’t think we will actually get to see the fear phase this season.
Fundamentals remain mostly in our favor and the market Oct. 7 had gained back roughly half of what it lost compared to the highs of late August. The Cattle on Feed Report keeps moving the goal posts concerning when we will be short of market-ready cattle.
We were supposed to be a bit short now, but the new report says we have a good supply of heavy cattle in feedlots. This lack of supply has to get here sometime, and the usual seasonal time of December through April is as good a bet as any. Both domestic and export demand is good to great as export records continue being set.
The Comprehensive Report On the U.S. Cattle Market, published for Congress and USDA, was released the first week of October. I think you might like the following gems I noticed in it.
1. Confirming and validating the linkage between fed cattle pricing and packer capacity.
2. With respect to fed cattle pricing, research shows that alternative marketing arrangements do not create market power because they do not change underlying supply and demand fundamentals.
3. Although not necessarily a popular position, most research confirms that the benefits to cattle producers due to economies of size in packing largely offset the costs associated with any market power exerted by packers.
4. Research indicates that there is market power, but its effect has been small.
I could see where this was headed and stopped reading for now.
COVID-19 is the risk wild card that will be with us for the foreseeable future.