I’ve been getting a lot of questions lately about opportunities for the US beef industry in China. Given the way these deals can go, I was hesitant to put a lot of faith in the possibility of re-opening this market (after 14 years). But today we received news that Greater Omaha Packing will be shipping beef to Shanghai starting today. This represents an opportunity for US beef producers; another source of demand is certainly welcome and could help boost our already-strong international trade numbers. However, there is
However, there is reason to be cautious: Chinese officials have placed a number of restrictions on imported beef. One of those restrictions is that the location of birth of each calf must be verified. While this practice is not mandated by the US government, it could become the norm if domestic and international consumers of US beef demand it. I still think it’s a long way off, but the fact that we are now shipping beef to China under this requirement is an important development in the broader conversation of traceability.
by Levi Russell
The recent run-up in wholesale beef prices has sent cash and futures prices through the roof in the past few weeks. This provides an opportunity for producers with spring-calving herds to lock in a profit. For instance, right now producers can buy a put option on the September feeder contract at a strike price of $135/CWT for $1,375. This is relatively cheap “insurance” since we’re likely to see calf prices fall again in the near future as wholesale beef drops back down or feedlot margins are squeezed.
Today’s cattle on feed report is a good example of bad news at the feedlot level affecting marketing prospects. So far today we’ve seen a significant drop in feeder futures due to the slow pace of marketing relative to placements in April. Now is a good time to lock in profit as we’ll probably continue to see some downward pressure on feeder prices in coming months.
For more information on hedging and options, check out the following publications.
Understanding and Using Cattle Basis in Managing Price Risk
Using Futures Markets to Manage Price Risk in Feeder Cattle Operations
Commodity Options as Price Insurance for Cattlemen