Plains Feeders Launch Boycott
Of Formula Fat Cattle Trading

WICHITA, Kan. — Bleeding red ink and frustrated by the live fat cattle market’s inability to hold its own against captive supplies, scores of cattle feeders in Kansas, Nebraska and Colorado are joining a temporary boycott of formula and grid pricing schemes.

Participating feeders are being asked to sell only on a negotiated cash price basis for the next two weeks.

The effort began in Nebraska, which has seen a fairly rapid recent erosion of live pricing as captive sales mushroomed in an area where they were relatively uncommon in the past.

Steve Kay’s Cattle Buyers Weekly quotes Nebraska Cattlemen’s Jeff Nolle as saying that non-negotiated sales now average 40-50 percent of the state’s weekly slaughter. That is up from virtually nothing two years ago and easily double the figures of as recently as last year.

In Colorado, captives have ballooned to upwards of 70 percent week in and week out, even by USDA’s incomplete count.

Stolle has described the traditional bid and price discovery systems as "dysfunctional" in a market where captives make up such a large share of purchases that the cash market is relegated to an "alternative procurement mechanism" to fill holes in weekly slaughter schedules.

Meanwhile, live cattle prices have tumbled almost $10 cwt. from where they were a year ago, while carcass and retail beef prices are only fractionally lower. Spokesmen for the processing sector and other proponents of non-negotiated selling blame the bloodletting on an oversupply of both beef and competing meats, but the stability of carcass and retail prices appears to belie that.

The Nebraska effort led to a petition drive for the "Great Nebraska Formula/Grid Out," a play on such temporary swearings-off as the annual "Great American Smoke-Out." CBW reports that the Nebraska petition had "115 to 120" signatures by last Thursday, 90 percent of them representing feedlots.

Packers, predictably, are downplaying the effort. CBW quotes IBP’s Gary Mickelson as saying his company buys "between 75 and 80 percent" of its cattle on the cash market anyway, and an Associated Press article on the matter quotes a written IBP response as objecting to being "so frequently portrayed as a villain, when study after study show that cattle price changes are due to basic supply and demand, not packer concentration or captive supply."

That defensive response may be unwarranted; despite the packers’ role in enlarging captive supplies and their recent shameless milking of a helpless market, CBW says most of its respondents blamed themselves and their fellow feeders for much of the mess.

"They see the boycott drive as a means for feeders to examine their own marketing practices," Kay writes.

The AP story also quotes Excel’s Mark Klein as blaming the market’s weakness on the same old bugaboo of "just a lot of meat. A lot of beef, pork and poultry."

Other critics of the cooperative effort dismiss the signatories as people who generally sell in the cash market anyway, thus predicting that the boycott will accomplish little or nothing.

Still, the organizers are taking it seriously.

"It's an attempt to show our solidarity. We need to figure out how we take back our cattle market," said Luke Schweiterman, a commodity broker and cattle feeder in Garden City, Kan.

"It's getting back to the way we've done business for the last 100 years, that has been destroyed in the last five," said Brett Gottsch, a partner in Gottsch Feeding Corp., based in Elkhorn, Neb.