By Matthew Diersen
A few weeks have passed with the newest direct fed cattle reports from USDA-AMS. The reports cover base prices used in formal-priced transactions and the final net prices received across purchase types. The base prices show up thrice daily in morning, afternoon, and summary reports. Those prices are then aggregated into a weekly report. Here are some observations on the weekly reports available so far.
In looking at the new reports, I was reminded of several conversations held years ago with a local cattle feeder. He was not a fan of formula pricing. He sought premiums for the cattle he was finishing that he thought deserved a premium price, either for the way he finished them or for their inherent or underlying quality when placed. He thought that selling above-average cattle using formulas (or price adjustments of any kind) with an unknown base price or with a base price tied to a plant- or regional-average price, meant that he would be giving away much of the premium he sought. Seeing net prices, say for formula cattle, still only told part of the story. The more transparent base prices and more complete net prices seem to fill in more of the gap between the average value of average quality cattle and fair values for higher quality cattle being traded today.
The weekly formulated base, called LM_CT251 and numbered 3502 shows the formula base price across gender, general quality level, and delivery type. For example, there is now a head count and price range for the base price for formula priced steers, delivered dressed, grading 65-80% Choice. The average net price is there too, thus any major skew in the data would be easier to infer than in the past. The main averages are also broken out by state or region. It is all informative and overwhelming. However, knowing the base you are dealing with as a buyer and as a seller should mean better signals about the value of quality.