All too often we find ourselves not trusting that things can be good to us. It’s going to stop raining, winter’s going to be too hard, things cost too much, and on and on and on. The biggest one now is that this market won’t stay good enough for long enough. We are all guilty to some degree of this sense. Market crashes of the ’80s,’90s and2015 seem to occupy real estate in all our minds.
In 1991, George Strait came out with the album titled “The Road Less Traveled.” The namesake song started with the lyrics, “There’s a road, a winding road, that never ends. Full of curves, lessons learned at every bend.” Well, here we are again.
It’s definitely hard to trust this market for many reasons. It’s too high and our realistic nature tells us it’s going to come down. Interest rates and inputs have escalated so much that we just don’t trust it’s going to stay good enough long enough to outlast inflation. All the lessons learned at every bend tell us to prepare and expect the worst on this road that never ends.
In my travels recently, I started in South Sioux City, NE, working the Superior Livestock Auction’s Corn Belt Classic video sale with just over 60,000 head marketed across the country. It was a very telling market from several perspectives. Most notably was that breakevens for buyers are all over the place. Comparable cattle were selling all over the gauntlet in terms of price. Small details of yesterday have become big details today. Any reason buyers could find to not escalate their risk, they exercised that option. Cattle were awfully high across the board, and I can’t blame these buyers for being cautious about giving more dollars per head than they ever have. Safe investments are hard to come by on their side of things right now. Farmer feeders are going to need to be creative this year. Luckily, feed costs are in their favor, but they’re carrying a lot of risk with a lot of interest leading to a lot of uncertainty.
As of this writing, the Northern Livestock Video was hosting their Early Summer Special sale, and it appears this trend is the same across all video formats.
I went from Superior’s sale down to Oklahoma City to attend the Livestock Marketing Association’s (LMA) Annual Convention and World Livestock Auctioneer Championship.
There, respected market analyst Derrell Peel of Oklahoma State University brought forth some of the most interesting data. The cow-calf guy isn’t the only one on the road less traveled, feeders and packers alike are on their own path navigating their own set of challenges. To adjust to changing market conditions, creativity has continued at play. According to Peel, most steers are spending over 200 days on feed, which has helped the trend that carcass weights are 37 pounds heavier than last year at this time.
Cheaper feed costs have allowed packers to adjust kill rates and slow down some production, especially with heifer numbers helping prop up production. In fact, heifer numbers have surpassed 50% of slaughter data for the first time since 1986. While the nation is down 4.5% of head slaughtered, beef production is actually up slightly. Balancing labor, markets and procurements can’t be easy, especially when you take into account they are balancing shelf demand and price. To the argument about imported cattle and beef-on-dairy cattle pulling this market down, data is suggesting that these areas, for now, aren’t playing a significant role individually. In fact, Mexican cattle imports are currently making up less than 4% of beef marketings.
Peel said culling rates have maintained and he is projecting heifer retention to start this year. However, with the time it will take for these heifers to come into production and produce marketable calves, he expects at least 24 more months of strong calf markets. This was also a sentiment shared by many video reps saying customers are planning to retain heifers this year that were previously sold. This is the first time in the last few years that have surfaced retention is on its way, it’s just not here yet.
While we navigate this path forward, caution is definitely one of the first senses we feel. This summer is going to be rewarding to see what people are going to sell their calves for. My takeaway from this is that careful planning, strategic marketing and intentional effort to make your calves as marketable as you can will matter as much this year as it ever has. Key factors are continuing to favor the cow-calf producer and for the moment, we can see right where we are headed to.
With this information, it feels as though we can rely on a good market this summer, barring some catastrophic event. In that case, if we’re going to continue to quote George Strait and all else fails, he also sang “Blame it on Mexico.”— LOGAN IPSEN
