Beef Buzz News
TCFA’s Ross Wilson Sees Robust Price Discovery a Regular Thing in the Southern Plains
Fri, 30 Jul 2021 10:14:48 CDT
At last summer’s National Cattlemen’s Beef Association business meeting, cattle producers wrestled with the concept of enough negotiated trade. Agreement was consistent: not enough price discovery. So came the 75% Rule.
With two quarters under our belts already, Ross Wilson, president and CEO of the Texas Cattle Feeders Association, said feedlots in his region are on board with the rule.
“We are strong supporters of the industry plan, and I think NCBA has done a great job of managing a very challenging and difficult process.” Wilson said. “We full well recognize and acknowledge that we had improvements to make in our tri-state area of Texas, Oklahoma and New Mexico.”
The pendulum had swung too far with the alternative marketing agreements, Wilson said. We had also allowed negotiated trade to get too low, he added.
Coming off of historically low periods, Wilson said there is good university research that says our area needs to be in the 10-14% range.
It takes a while to “turn the ship” Wilson said, but we are now back and working hard to stay there.
The 75% Rule helps get more cash cattle trade, but it has less impact on leverage.
He said the plan is different than the leverage issue between the feeder and packer, which is more of a situation of the balance or imbalance of the cattle supply and the packing capacity, Wilson said.
The imbalance is changing, and it is swinging back in favor of the feeder, he said. This is due in part to the tightening of cattle supplies.
Wilson said the real long-term solution is to get more hook space and packing capacity.
We need to continue incentivizing cow-calf producers to grow their hurt while simultaneously expanding packing capacity, Wilson said.
“One of the more frustrating things in the last year and half of the pandemic has been watching the profit margins of packers without any seeming effort to expand capacity,” Wilson said. “Basic economics indicate if you have been making that level of profit for that long, you are going to expand your business.”
We are only in the beef business, Wilson said, but they are in multiple proteins.
We have a host of new players showing up, which is a good and exciting thing, he added.
A potential long-term concern is the economic viability of the small plants, Wilson said, because there will inevitably be some rough years financially.
Click on the LISTEN BAR below to hear more from Ross Wilson.
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