NASHVILLE, TENN. (RFD NEWS) — Congress is racing to present a federal spending plan, or risk a government shutdown at midnight on Friday, Jan. 30, which could send the markets into a tailspin.
Talks are underway to secure a deal, but nothing is set in stone yet. The Senate passed five spending bills on Thursday, but it is unclear how long the House will take to process them, and whether the legislation will stall over concerns about additional funding for the Department of Homeland Security and U.S. Immigration and Customs Enforcement (ICE).
The U.S. Department of Agriculture (USDA) has not issued any plans for what to do if a shutdown is triggered, or the impacts on the agriculture industry could be
During last year’s shutdown, the longest in history, tens of thousands of USDA workers were furloughed until it ended. Field offices were also largely shuttered, with many agencies keeping only a bare-bones staff. However, in that Continuing Resolution passed in November, Congress earmarked funding for both the USDA and the Department of Health and Human Services (HHS) through the end of this year.
However, the federal government’s status is far from the only factor moving the markets on Friday. Two critical reports released today on inflation and the status of the U.S. cattle herd are also top of mind.
Producer Price Index Rises Above Market Expectations
The Producer Price Index (PPI) for December was released early Friday morning by the Bureau of Labor Statistics, providing a new read on inflation before it is passed down to consumers.
The numbers show inflation came in hot last month, landing at 0.5 percent in December. The trade was expecting a 0.2-percent rise. PPI increased 3 percent year-over-year. On the other hand, the markets expected 2.8 percent.
One of the key industry concerns regarding rising producer inflation is input costs like fertilizer. Stone-X Fertilizer expert Josh Linville joined RFD NEWS Market Specialist Tony St. James on Friday’s Market Day Report with his reaction to PPI and an update on current fertilizer markets.
Cattle Inventory Report Will Reveal Status of U.S. Herd Rebuild
Now, the markets are preparing to digest the forthcoming U.S. Department of Agriculture (USDA) Cattle Inventory Report, slated for release on Friday afternoon. The biannual dataset should give us a look under the hood at whether consolidation is any closer to ending. Trader Brian Hoops with Midwest Marketing Solutions says there are signs of retention and explains what to watch out for this afternoon.
“We talked last week after our cattle-on-feed report that we are starting to see a little bit of heifer retention compared to what we’ve seen over the last four months, and that could show up in this report once again,” Hoops says. “Now the estimates for all cattle and calves are 99.7%. We know the numbers will be tight, but calf crop at 99.3, cow herd at 100.4, and replacement heifers at 101.7. So, the numbers that you really want to watch are whether we are seeing these replacement heifers starting to show up on these reports.”
A high-performing calf crop hinges on strict breeding management, such as 60-day seasons and optimal nutrition. Calf crop is the number or percentage of calves weaned relative to the number of cows exposed to breeding, with a 90–95 percent rate considered high performance. Key metrics include the number of calves born, cow-calf reproductive efficiency, and weaning weight, which determine profitability.
Some cattle producers say the numbers could signal it is finally time to rebuild. With prices high and supplies tight, rancher Cody Gerlach explains why he is choosing to start now.
“Personally, I’m trying to rebuild the cattle herd — I don’t know how many people across the U.S. are,” Gerlach says. “I was watching a sale the other night. There were just some commercial black heifers that sold for $6.25/lb. for 500-weight heifers. What I noticed from that sale was that it was two breeders bidding against each other to bring those heifers back into their herd. So I think we might be getting to the point where people are throwing in the towel and just saying, ‘Hey, I’ve got to rebuild the herd at some point. Let’s just start doing it now.”
Gerlach shares that the herd rebuilding process takes many years and requires coordinated efforts across the cattle industry. He remains optimistic about a bounce-back if U.S. cattle producers can solve this problem.
“I think if we can continue to see U.S. cattle producers rebuilding that herd over the long term, we’ll see some feed demand come back from that industry,” Gerlach says. “I still think the cattle cycle — it’s not like grains where you plant it in the spring and harvest it in the fall — it’s a multi-year cycle that’s going to take some time to solve. And I don’t think it’s a short-term solve over the next six months. It’s going to be a multi-year problem until we get the cattle herd built back up, especially with everything else going on globally.”
The USDA’s Cattle Inventory Report will be released on Friday at 3 PM ET.
RFD NEWS will continue to monitor action from Capitol Hill impacting agriculture on Market Day Report, Rural Evening News, and our online platforms.
