Tips for Cattle Producers

(Bob) Volatility. Funds. Risk management. If you’ve heard cattle market commentary in the past few months, you’ve heard all of these, a lot. Commodity broker Doug Deets says the landscape is changing as rebuilding begins—noticeable gains in cowherd inventory will start to appear in 2016. (Deets) Then, the multiplier effect kicks in. You’ve got, you know, more cows, more calves hitting the ground, more beef production the following year, eighteen months down the road. So, right now, though, we’re expanding a liquidating herd, so we’re just now making that switch from liquidation to expansion, and that’s why supplies have been so restricted this year. But beginning next year, you’ll gradually begin to see an increase in cattle supplies and beef supplies from up on the market. And it will exponentially increase every year after, as long as we continue in an expansion phase. (Bob) That’s why index-fund investors have left the market, they see long-term lower prices. Commodity funds that lost money are looking for more lucrative ventures. And that’s why today’s cattle market presents unique challenges. (Deets) What does a guy do? You know, if you’re in the business, you’ve still got to be in the business. And, it’s a difficult decision. I think you just basically have to stay with your plan. There’s not a real risk management opportunity right now. If you have to do something, you buy a minimum pricing strategy, like a long-put option, and leave the top side open to the market. (Bob) There is one constant that can help buffer some of the wild swings, Deets says. (Deets) If you handle quality cattle, and many of us do anymore, stay with a program. That hasn’t changed. That’s been probably the most consistent thing through this whole process, is the demand for high-quality beef has held up extremely well. There are still premiums out there, you can still get them. Why anybody would veer from that is beyond me. (Bob) I’m Bob Cervera.

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