One of the most important things we can do is accurately interpret indicators that affect our decisions as ranchers. We must remember, though, that indicators don’t mean it’s going to happen. Over the course of the last decade, we’ve seen market indicators that were blown way out of proportion and that proved to never happen at all. We’ve seen indicators from some of the nation’s top economists say that we were supposed to see a recession sometime in the last two years, but that hasn’t happened yet.
In the last couple weeks, we saw Fed Chairman Jerome Powell come out and say they decided to maintain interest rates when nearly every indication was that they were going to reduce rates and inflation had slowed. This wasn’t the case, and it appears they plan to maintain rates into 2024 before the discussion will be brought up again about a potential reduction. In fact, inflation was stronger than they predicted, and the Consumer Price Index set in higher than anticipated at 3.1%.
Everything we look at from a market indication standpoint says we are going to see higher highs. Bigger strings of cattle are bringing a sharp increase no matter where they are selling in the country. Lower feed costs and a short supply availability have things rolling higher and higher right now. Every inventory report indicates tighter supplies, a smaller calf crop and managing a 2.5% smaller cow herd over last year. Indications of a more favorable weather pattern across the country also bolster forecasts. There isn’t a lot of bad news for the ranchers calving cows right now.
We are in the midst of the spring bull sale season across the nation. The WLJ field staff is on the road nearly every single day right now attending bull sales for our various advertisers. Conversations happen with so many people, and you get a snapshot of attitudes and trends when you speak to the ranchers working daily on their operations. It’s very easy to find out what matters most.
As most people have seen, these bull sales have been really strong. In a recent conversation, a guy mentioned to WLJ staff that he couldn’t believe how the ranchers have taken note of quality bulls over commodity bulls and what people are investing in the bulls that provide the genetic merit they desire.
Ranchers are absorbing information presented in the respective sale catalogs and driving their buying decisions off a combination of data, pedigree, program and phenotype. When these factors line up, bulls are bringing quite a bit of money this year, but they carry all the indications they are going to help the rancher’s operation while also adding value to his marketable calf crop. The data inside these sale catalogs such as EPDs, measurements and DNA all carry a margin of error from the time of purchase to when that bull is proven. All the information in these catalogs are simply indicators of what we can expect the animal to do. If it were 100% guaranteed, we’d only breed to one bull a year.
When thinking about carcass data when it comes time to buying a new crop of bulls with new genetics and data, we have to realize the trends we see nationally take time and Mother Nature doesn’t really speed the process up. The indicators from nearly every reporting facility are showing stronger trends in carcass quality and carcass size.
Making bigger carcasses that grade better is something we don’t talk about a lot, but it’s been happening for quite a while now and it’s going to be a key piece we watch as we soar into much higher breakevens on the feeding and packing side.
To me, this plays into the conversation when we start worrying about how the consumer is going to handle another rise in the cattle market and if our industry is going to expect the consumer to absorb more increases at the counter. By all indications, there are some factors at play that still leave a little room, especially when we talk about carcass quality and size and how feeders can manage lower feed costs and manage bigger carcass weights. There’s some flexibility to be had at a few key points that can allow the packer and feeder to place carcasses into markets where the consumer won’t divert to another protein source.
Each trading day provides another opportunity to see these factors at work. The progress our industry has made long-term to offset the loss of smaller farms and ranches, lower cow herd numbers, and fewer usable acres with added performance, conversion and grading—while having the maternal genetics to move forward—makes me believe in the indications our cow herd is set up to take on the challenges we’ll face in the next decade. — LOGAN IPSEN
