The end of October saw a big change in the calf market. The knee-jerk reaction to the latest Cattle on Feed report saw a drastic dip in the spot market for those who market their calves at the local auction market. Calves that were forward contracted during the summer video auctions and loaded on a truck the same day as their contemporaries that got on a truck from an auction market were receiving a $20-plus premium. It definitely paid to forward contract your calves—if you had the means—if that week was your marketing window.
Now my observation on the market response to the Cattle on Feed report, calling it a knee-jerk reaction, comes from a couple of points. The market has already responded in the first week of November by tacking money back on the calves. Most markets in my region were up after the down market experienced the week earlier. The demand is still evident, and the supply is simply not there. In Montana in particular, after the last few years of drought and major selloff of cows, the inventory of calves is simply lower. The herd rebuild has not started yet.
I do foresee commercial ranchers looking to restock their ranches after they put their calf checks in the bank, take inventory of their hay stocks and meet with their accountants. However, these additional cows brought back to their ranches are going to restock the inventory lost from the last couple of years; I do not see it being a herd expansion yet.
Another major discussion point from ranchers is that these higher prices received for their calves along with their cull cows and bulls were necessary. Sure, there should be profit at these price levels, but when you consider the increase in input prices, there is not as much profit left over at the end of the day as at our prior historic prices. More money in and more money out. We will need to realize these higher price levels for the foreseeable future in order to incentivize ranchers to expand and to encourage the next generation of ranchers to take the gamble and make this business their livelihood.
Now I will admit that I am a chronic optimist and I do believe that the price levels we are experiencing in 2023 will be the reality for the next couple of years. I also believe that inputs will stabilize, making future planning easier and providing this incentive. The wild card in the equation is interest rates. If you have to borrow money this will be the one limiting factor to producers.
On another note, we have been busy planning the 2024 Livestock Tour presented by the Western Livestock Journal. Pete Crow, my wife, Samantha, and I spent a week in Texas lining up what I believe will be a great tour. The details are still being finalized, but we will be making a loop from San Antonio to near Houston, up to College Station, and back to the San Antonio area. We will get to see some diverse landscapes in this loop and some excellent agriculture operations.
The type of cattle and operations we will visit will be very diverse and we will get to visit with some very innovative and progressive operators. The tour is scheduled for May 19-25, 2024, so mark your calendars and plan on joining us then. Registration and more information will be available in December.
There are a lot of reasons to be cautiously optimistic in the cattle business right now. Demand for our product is at record levels. I also credit the cattlemen in the U.S. with improving the genetics and quality of the national cow herd. Stay the course and always be on the lookout for ways to improve. Take advantage of opportunities to learn, like on the Livestock Tour in Texas this next year. Keep working on improvement. With this market, coupled with your hard work and a little help from Mother Nature, I believe we are in for more good times ahead. — DEVIN MURNIN
