Progress on & Prescriptions for Thinning Fed Cattle Markets

Transcription

1 Progress on & Prescriptions for Thinning Fed Cattle Markets Stephen R. Koontz Professor & extension economist Department of Agricultural & Resource Economics Colorado State University February, 2013 Okay, you go to your Doctor & what do you expect to hear? Take two aspirins and call me in the morning. Eat less, drink less, lose some weight, get more sleep, you need more exercise, reduce your stress, don t drink so much coffee, eat your broccoli, stop driving so much, put on your sunscreen 1

2 Have you heard of these markets? (Northeast) Kidney Exchange Physician Residency Exchange Public (Boston) School-of-Choice Exchange Auctions of radio spectrums Online Exchanges like ebay what happened to it? Eco-systems Service Markets in Developing Countries Fisheries Rain forrests Most are new & would not work without some active market design. leave it to the market fails. Do you remember these markets? Hog Prices for Ohio, Indiana, Illinois, & Kansas Fed Cattle Prices for Pennsylvania, Illinois, Wyoming/Montana, S. Arizona, S. California & N. California Most commodity markets (hogs & pork, dairy products, eggs, metals ) became what they are before we knew what to do to keep markets from failing & to maintain thickness. 2

3 Policy Prescriptions for NCBA Industry Communication & Voluntary Leadership meet & discuss individual actions add up Basis-to-Futures Prices Cash Trading Institutions New Market Reporting & Trading Technology develop e-markets forward contract reporting New Trading Institutions agree to no market plus or feed additives New Market Information shows detail needed to mitigate risk Employ Market-Makers CRP example Develop Permits or Certificates Market solution to problem value of information Progress on NCBA Project Policy Prescriptions for NCBA Leadership. Interviews Responses needed for How thin is too thin? Valuation of cash fed cattle markets. Need for a producer survey Being designed Administered in spring/summer There are strong incentives to leave the cash market and to protect the cash market we need to do things to counteract those incentives. We also need to put a value on the cash market and its information. 3

4 Learned to date Harder questions to answer than I though (but that cost me and not you ) Easy recommendations Concentrate on making basis-to-futures cash trade work. Concentrate on reporting deferred forward contracting this is the thick market. Innovative recommendations Employ market-makers. Develop a permit system. Valuing the cash market is important & hard. No easy right answer: do easy things & work on hard things STEERS/HEIFERS SOLD BY TRANSACTION National Weekly 4

5 Definitions is the cash market there is bid and ask may be live weight or carcass weight or grid but there is price discovery. is the price is discovered elsewhere may be plant average price or a USDA AMS regional price or a downstream price or a futures price but there is no price discovery. The terms of the formulas may be negotiated but prices are not. contracts are transactions with >14 days before delivery. Packer owned are 10 packer own cattle. AMAs (Alternative Marketing Arrangements) and not Captive Supplies STEERS/HEIFERS SOLD BY TRANSACTION Texas, Oklahoma & New Mexico Weekly 5

6 12 STEERS/HEIFERS SOLD BY TRANSACTION Kansas Weekly STEERS/HEIFERS SOLD BY TRANSACTION Nebraska Weekly 6

7 5 45% 4 35% 3 25% 2 15% 1 5% HOGS SOLD BY TRANSACTION National, Weekly Purchases Other Market Swine or Pork Mkt Other Purchase Packer Sold Packer Owned 7 TOTAL CATTLE SOLD BY TRANSACTION Monthly

8 8 CATTLE SOLD ON A DRESSED BASIS Monthly CATTLE SOLD ON A LIVE BASIS Monthly

9 Mil. Head CATTLE SOLD: LIVE vs DRESSED Monthly Live Dressed Contact & Link Information 9