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Friday, August 15, 2014

New levels mean new optimism

by WLJ

Each summer, the Western Livestock Journal prints a special magazine, the Commercial Cattle Issue, to showcase products, sales and programs for the upcoming fall season and this is without exception, one of the best we have produced to date. I hope you take the time to look through this as our team has worked hard over the last couple of months preparing this for our entire readership, both online and in print. Thank you to all those advertisers who took advantage of the opportunity!

The last couple of weeks in this market has created overwhelming proof that the current inventory we have on hand in terms of available feeder cattle and breeding females won’t allow the market to stay suppressed for any length of time.

Forecasters have been calling for this trend for almost two years, and as the national cow herd tries to rebound and find stable numbers again, the overpowering temptation to market young females into the feeding chain is hindering the cow herd’s ability to keep up. Even so, both feeders and packers are continuing to make profits even though the recent Russian border issue dented feedlot margins by as much as $70 per head last week, the overall demand is strong enough and those margins are rebounding rather quickly and should reach levels in the high $200s quite soon. I look for these markets to reach new heights as we move further into the fall season and available feeder cattle supply dries up.

The irony with the Russian government playing nearly a $9/cwt. hit in our markets is that they haven’t been taking our beef for nearly a full year anyway. As the story began to break, it seemed to me that it would take an issue in something other than our actual markets to trip this steady incline. My view is that it is going to rebound rather quickly as this didn’t really impact the infrastructure of our industry. We all know that there are countries out there that could have a strong negative impact on our markets, but Russia doesn’t fall into that immediate category. Although they are indirect purchasers of some products, mostly offal at this point, the impact will be minimal over the next few months.

Each time we reach a new height, it seems to separate people into two categories: those who think we have flown too close to the sun and are about to have our wings clipped, and those who think we will see today’s highs be tomorrow lows. A couple of weeks ago, I fielded a call from a northern California WLJ subscriber. His family has been a WLJ subscriber since the 1940s. He began talking about all that had happened in the markets and situations over that span and that with the current markets, no one has ever seen or even thought they’d ever see these levels. His motion was to bring more optimism to our editorial, and it’s a great point he made.

The year 2014 has been one of the most peculiar on record for our industry. With so many issues casting a negative light over the last 12 months, we report on them in efforts to keep our readership informed. It’s vital to keep up-to-date and stay educated, but so often many of these issues are negative in nature and it’s easy to become complacent with negativity. I find it very rewarding to know that the optimism runs deep in our readership. It doesn’t take a long scope to find optimism with markets like these that can handle adversity and rebound in a matter of days.

From a beef perspective, it is rewarding to see a large portion of the country in very favorable conditions this summer. Recent corn and soybean reports are still calling for a robust crop this fall.

Many are forecasting the next USDA report will reflect this and are preparing for corn, soybeans, barley, oats and wheat to take yet another dip in value. The current report is claiming 172 million bushels over last year’s record harvest!

In the California region, with extreme drought conditions, optimism is continuing. On Aug. 2, at the Turlock Livestock Auction Yard, Turlock, CA, a new high was reached as a group of commercial bred heifers reached $4,000 per head during their annual fall calving commercial female sale. Many of the females that sold that day were valued in the high $3,000s. If that isn’t optimism, I’m not sure what is! — LOGAN IPSEN

 
 


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