FAT CATTLE
I just watched the president of Tyson Foods on the news telling people that there will be no meat on the store shelves which guarantees the shelves will empty even sooner. Of course he was blaming the pandemic for plant closures. The anchor thanked him for working so hard to keep food coming and for giving out 60 million to their employees. Isn’t he a wonderful, generous guy? Well, here are the numbers for the beef side of the equation. Keep in mind that these numbers are averages and estimates based on general numbers. In reality it is a very complicated business, but the general numbers will let you draw some definite conclusions.
On 4/29/20 per USDA reporting the choice cutout value was 357.38/cwt. Cutout value represents the estimated value of a beef carcass based on prices being paid for boxed beef cuts by retailers. The average price paid for live cattle was 97.98/cwt with the average weight of 1,499 and the average dressing percentage of 63.71%. Now let me carry those numbers a little farther.
1499 lbs x .9798 = 1,468.72 paid to the feedlot. The feedlot deducts the feed bill from that amount. Currently that feed bill will run somewhere between 450 and 550 per steer depending on the feed costs, days, etc., so the rancher who owns that steer will receive $968.72. Think about that for a minute. 968.72 for at least 18 months of work and expense. There is no shortage of available slaughter ready cattle. The backlog continues to grow each day as do the cattle (and their feed bill) who are being fed weeks longer than they should be.
Now let’s go to the other side.
1499 lbs x .6371 =955 lbs hanging weight. 955 lbs x 3.5738 = 3,412.98 3,412.98 less the cost of the animal 1,468.72 is 1,944.26. Wow, that is quite the margin. Now that packer is going to say he has expenses, so let’s keep digging.
I went back a year ago to see what things looked like then. The choice beef cutout value per the USDA on 4/30/19 was 231.84. Live cattle on May 1st of 2019 sold for 126.00. That number is not an average. That is what we sold cattle for on that date at a pay weight of 1,372 lbs. That looks a lot better for the rancher. Let’s see if the packer was losing money in 2019.
With those numbers in mind I looked at the Sterling Beef Profit Tracker for the week of March 29, 2019. According to that report packers margins were $140.07 and the cattle owner $149.27. So if the packers could make 140/head while paying 126/cwt and receiving 231.84 what do you actually think they are pocketing now? 126.00/cwt equals a profit for the rancher of $149 so what do you think the loss is at 97.98/cwt?
So remember that guy who is so worried about keeping everyone fed and taking care of his employees. Let’s look at the USDA numbers again. The April 29th, 2020 slaughter is 72,000 head down 49,000 hd from the previous year. I used a margin of $1600 each (using the previous year numbers, I came up with 186 for expenses per animal so I gave them a generous expense increase for this year and came up with a 1,600 margin).
April 29th 2020 – 72,000 hd slaughtered x $1,600 = $115,200,000.00
April 29th 2019 – 121,000 hd slaughtered x $140 = $16,940,000.00
That is the profit made in one day. Doesn’t look like the reduced slaughter capacity is hurting the packers at all does it?
I don’t begrudge anyone making a profit but there is something really, really wrong with this picture.
80% of all meat (chicken, pork and beef) processed in this country goes through the hands of 4 packers – Tyson, Cargill, National Beef and JBS. JBS is a Brazilian company so the money they make won’t even stay in this country.
4 companies – 80%
This is not a new problem. The cattle industry has been trying to get the attention of politicians and consumers for years without any luck. Now we see the results of allowing 4 companies to control our meat industry. The huge profits they are making are built on the losses of the American Rancher and the pocketbook of the American Consumer.
We need everyone to speak up. Call your congressman, sign a petition, email your cousin who works for the brother of your state senator, just do something to get someone to listen!
And if you can, buy locally produced food! You will get a better quality product and the money you spend will stay in your community.
Just a footnote here. As of today, May 7th, Choice cutout reached 458.54/cwt, a 100 dollar increase in a week, with retailers forced to bid increasingly higher prices. Live cattle sold today for 99.79/cwt an increase of 2.00/cwt. You can see these daily reports on the USDA website.
Until next time.
Don’t forget to shut the gate.