Cattle Today

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BETTING ON A BETTER MARKET

Jay Nixon

We have just come through one of the most difficult and certainly one of the most confusing periods I have ever seen in the cattle business.

The signals were all mixed. The cowherd was on the decline in numbers, the economy was good. Heck, 18 months ago it looked like the market was on the mend and the beginning of a new upward cycle in prices was in the offing.

It didn't happen. Fat cattle prices didn't meet feeder expectations, so the feeders held back on selling, resulting in a backlog of heavy, over-ripe cattle in their yards that drove prices down. Hogs got so numerous on the market that it was cheaper to buy a hog than to slaughter it, and all that cheap pork flooded the market in competition with beef. At home, producers held back feeder cattle to heavier weights resulting in a glut of heavy cattle waiting for entrance into the feedlots. Meanwhile, the big packers were having a last fling before numbers turned completely against them and were holding the prices of fat cattle at an abysmal level.

Very few of the economist-predictors of the market came out with a whole skin, and neither did us amateur predictors – no matter how good our records had been in the past.

Now, however, it looks like things are beginning to level out. Heifer and cow slaughter have been up three years running, and numbers are down. The wags tell us that cow numbers in the country are the lowest they've been since the 1950s. As for competing meats, hog production has peaked and is definitely on the decline and chicken is holding pretty steady.

If I were a betting man, and who in the cattle business isn't, I'd say we can look forward to returning to a normal cattle cycle that should hold for us over the next four or five years. This would mean a gradual rise in prices over that period as herds rebuild and numbers of brood cows rise. It would mean that feeder cattle would return to some semblance of a profitable level and would continue to gain ground. It would mean that cow prices, though they haven't been as low as they probably should have been during an economic wreck, will also rise with the markets for other types and weights.

I think this will happen, and I'm going to bet on it, myself – very carefully and judiciously. We've all heard the expression, “once burned, twice shy,” and I suppose this is my biggest problem. In normal times, there's no one more optimistic than a cattleman. He can undergo tremendous economic trials, lose his shirts, suffer mightily, but when grass comes and prices start up, he tends, all too quickly, to forget the bad times and take the plunge again. In the good times, he seems to believe it will never turn down again.

But this time, so many feeders lost so much money for such a long time, that I don't believe we'll see heavy feeders selling for a dollar a pound anytime soon. Maybe this will, for a time, act as a brake, and make this coming price rise more orderly and longer lasting.

On the other hand we have to keep in mind that conditions, especially in the South, are not what they were in the beginning of the last upward cycle. The big packers play a much more prominent role than they did, then. We must always keep in mind that even when we believe we have them by the throat from the standpoint of numbers, they can still throw a kink in the market. Iowa Beef Processors can still break the fat market any given week it chooses, even though the USDA is looking down its throat. It has that much buying clout and that many captive cattle.

Montfort ConAgra, another of the packing giants, has told everyone who will listen that they will buy no cattle with any ear at all. They say their research is telling them that any vestige of Brahman breeding reduces the quality of the meat. I don't know who told them this, but the powers that be in the company believe it and have said so publicly on several occasions.

I personally think this point of view is not only unrealistic, it is also 180 degrees off of factual. It reminds me of the time when Excel, the third of the three packing giants mouthed opinions that were much the same, and spent the next three years recanting and apologizing for their error.

As big as they are, and as powerful, they can't change the facts. I'm betting that if someone took a census, they'd find that at least half the cattle in the country have some Brahman in their background. I'm also betting that once the hide is off a bunch of cattle, these experts in the meat business wouldn't be able to tell which ones had some Brahman breeding and which ones didn't.

Such declarations and such opinions can be chalked off to the fact that these high corporate muckety-mucks are so far removed from the real world that they have to buy the opinions of learned consultants who are also far removed from the real world. But no matter, I only bring this up to demonstrate some of the possible problems we face during our long awaited upward price cycle.

In spite of all this, I recommend that we begin carefully to bet on the come. To expect an upward price cycle and to act on it, keeping in mind that we can't do it the way we always have without suffering the same results we have in the past.

The forecasters are predicting another dry year in 1999, and in my country, at least, it is starting out that way. So plan your growth judiciously. Don't go too fast. Watch your country and don't overload it.

Improve your cattle. Keep in mind the prejudices of the packers and try to produce what they want. Use bigger, better more muscular bulls and keep close records on what each cow is doing for you with every calf, compared to her peers. Don't waste your grass on low producers who can't turn off a 600 pound calf in seven months, every year. And if you are a steer producer, quit trying to produce your own replacements out of production. No matter how good the market is, you can't afford it.

Manage closely. Eliminate practices that don't make you money. Simplify your operation as much as possible. Sell off fractious, hard to manage cows and don't buy high-headed bulls. Take the time to manage, even if you have to hire cattle help to do the day to day jobs, and begin now to find new markets for your cattle. If your numbers aren't such that you can draw buyers on your own, join with your neighbors and market together.

The next few years should be good. Prices should be up, and you should have an opportunity to make back some of what you have lost in the past. Don't squander your opportunities by making the same old mistakes. Don't get overly optimistic. There are still problems, and the market will again turn down somewhere out there.

So make it and husband it while you can. Most of all, enjoy the breather.

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