Harrington's Sort & Cull
John Harrington DTN Livestock Analyst

Friday 11/29/13

Black & Blue Friday

Cable channels, YouTube links, and Facebook pages are already bloating like a foundered steer with images of commercial mayhem and violence. Black Friday always brings out the very best in American retailers and shoppers.

Whether it's old ladies being stampeded in Wal-Mart's predawn parking lot, determined mothers slugging it out in isle seven over the last discounted Xbox, or sleep-deprived zombies destroying everything from the back of the store to checkout, scenes of this strange and dangerous post-Thanksgiving tradition seem to get more horrifying with each passing year.

If only Norman Rockwell was still alive to capture the 21st century's version of holiday magic and cheer.

While the black in "Black Friday" is supposed to reference the annual threshold for retail profits, this grisly documentation suggests that the harrowing day might be better labeled as "Black & Blue Friday." At least that's what the crew in the emergency room tells me.

Yet since I personally shop at the safety of either a laptop computer or the drive-through at McDonald's on Christmas Eve (are fast food gift certificates ever wrong?), this turn of phrase makes me think of something a little different.

Big box retailers may be celebrating the return of black ink at this time, but beef processors continue to be stuck at a party far less fun. Furthermore, many of their cattle feeding customers fear that the inability of packers to score late-year profits portends of poor feedlots margins waiting in 2014.

The marketing geniuses at Target and Best Buy have the luxury of using aggressive discount strategies to pad the bottom line. Unfortunately, the beefy likes of Tyson and JBS have seen the "charge less" option completely removed for corporate playbooks. Indeed, the price-slashing standard of Black Friday would probably accelerate the equity drain of this industry.

If Macy's successfully uses lower pricing to stimulate demand for this widget here or that piece of fluff there, necessary restocking is only a phone-call-to-China away. On the other hand, packers discounting boxes in the face of shrinking, irreplaceable cattle supplies risk cutting their own throat on a dangerously clean kill floor.

With a record corn harvest essentially binned and some ranchers expressing cautious optimism about 2014 pasture prospects, talk of herd expansion is getting more and more air-time. Of course, should cattlemen really get serious about heifer retention next year, positive packer margins are apt to become even more elusive as fewer girls at the feed bunk make excess slaughter capacity more glaring and painful.

Nobody wants to see significant herd growth more than the managers of underutilized packing plants. Most will acknowledge that they are trapped in the middle of a dark supply tunnel, one that probably needs to get darker before it can see the first rays of light.

For more of John's commentary, visit http://feelofthemarket.com/…


Posted at 3:38PM CST 11/29/13 by John Harrington
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