A crystal ball would be really handy to have right now, but since none of us have one, we attempt to estimate what’s going to happen. Fundamentally, all the indicators are still in heavy favor on the production side. Though the bred female market has been steady over the last 45 days, I don’t see retention really taking hold for a while. Input costs are still so high, and smaller cow herds with shortened supply are still receiving pressure to sell heifer calves to provide operating capital. Producers are still in financial recovery mode with clear memories of the 2015 crash looming in the back of their minds.
The new year has started out with a strong rally amid tighter supplies and supportive weather patterns that have driven all classes of cattle into new record levels. Quite simply, these levels have everyone feeling excited, anxious and very cautious all at the same time. Fearful trades are happening every day right now as the board continues to trend higher. There are days here and there where hedge funds will trip trading volume and signal a quick selloff, but all appearances seem to drive contract prices back up in a very short amount of time.
Supportive weather patterns that got winter grass and wheat started sent lighter cattle into a strong rally earlier this fall. Much of the Plains and far West received ample fall moisture heading into the new year and grass is on the move. This fueled a large scramble that drove a sharp light calf rally where dollars per head ranged from $1,200 to nearly $2,000 to finish the year. These numbers have since continued to trickle up with reports of light five-weight cattle bringing nearly $4.25/cwt. Any attempt to pencil a breakeven on these calves would have to be answered on an individual basis. The risk on these calves seems awfully high, but collectively, these producers are continuing to purchase cattle and fill pastures.
Feeder cattle are continuing to push the needle as well. While writing this column, the Superior Livestock Auction was hosting their annual Bell Ringer Sale in Oklahoma City, OK, where cattle continue to drive into new realms. Heavier cattle were consistently bringing around $2,000-2,300 per head. As cattle are entering feedlots, their value has also continued to increase as nearly $25/cwt has been added to contracts since September. It’s really difficult to assume the market is going to correct itself, especially with small moves of $2-3 daily. It will take something catastrophic to slow the momentum down. The market is in a great position and consumer confidence has remained high.
Program cattle continue to bring premiums, and these input costs are still showing a sharp return on investment. This is, in part, driven by strong signals from the consumer level; they simply want to know a story around their food. They want to feel secure in their decision to purchase products raised in a way that aligns with their own belief system. There isn’t a single producer that I know of that dislikes their own cattle, but oftentimes there’s a feeling of privacy encroachment that goes along with marketing our beef. We must remember to be proud of the cattle we raise and not afraid to tell our story. Consumer confidence is a must have, especially when they hear about record prices.
Marketing is simply the creation of perception which formulates realized value. There’s an image that goes along with every move that corporate America makes. Take, for example, the recent move of Beyond Meat’s co-founder and CEO, Ethan Brown. Over the course of two days, he personally sold 475,772 shares of the company. Keep in mind, he still owns 1.7 million shares after these transactions. The stock has continued to tumble over the past five years and fell nearly 60% in 2024 alone. Immediately following the COVID-19 pandemic, the stock traded around $150 a share but now costs someone $3.60 to buy a single share. The company is reported to have a sharp cash burn situation with a building debt burden of over $1.2 billion. The image is that the company should be fading away soon, but they keep staying alive and have even launched new products in the last few months. By now, one would think the consumer has sent a sharp enough signal of their acceptance of fake meats. I would assume there will be more headlines surrounding this company in the coming months. Just ask the Bud Light brand what happens when consumers don’t like the messages being sent after they lost nearly a quarter of their customer base when a transgender spokesperson went viral with an endorsement deal in early 2023.
The Mexican border is going to slowly open again to imported cattle over the next few weeks; an estimated 250,000-300,000 less cattle have been imported, which has helped the immediate jump in domestic cattle. Couple this with a new administration taking office soon that will start implementing new trade policies and regulations, we could be in for an interesting time. For being the middle of January, it sure feels like we need the dust to settle and figure out where we are. — LOGAN IPSEN
