Todd's Take

An Old-Fashioned Lesson

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
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In October 2014, DTN Livestock Analyst John Harrington warned that the bull market party in cattle was running out of time -- a call that not only proved remarkably timely, but also reminded us about the dangers of getting carried away by the lure of good times and high prices. (DTN ProphetX chart)

After many years spent working in and teaching about commodity markets, I don't ever recall equating my job to the way a country minister might talk to his congregation. Not until recently, that is, after an interesting experience at this year's DTN Ag Summit.

The first time I ever read a commodity-related article that sounded like it could have come from a man of the cloth was a few years ago. In October 2014, at the height of the bull market in cattle, DTN Livestock Analyst John Harrington penned the article, "Cattle Party Rocks On, But With Fewer Lampshades."


Harrington described how record cattle prices and profits in the first three quarters of 2014 made for a helluva party, but also pointed out that fed cattle breakeven prices recently fell below breakeven levels. Harrington's parting line to the fictional barkeep was classic: "Just make sure they know, until further notice, no one else is buying their drinks."

The article was on point, as spot cattle peaked near $172 per cwt that month and sank below $100 two years later. Beyond the economic tip, Harrington's sober perspective captured the essence of where bull markets go wrong: We get drunk on the feeling of good times and often aren't prepared for what follows. It was a lesson on temperance as much as it was economics.

Why was I thinking about that this time of year? Was there something I needed to confess before Christmas?

No, it wasn't festering internal guilt, but my Tuesday morning breakfast with a small group of impressive guys that happened to come to DTN's Ag Summit meeting in Chicago.

As official host of our table, I was supposed to have a conversation starter, so I came up with this: As you know, with grain prices in the dumps again this year, there are a lot of farmers that won't be taking their families on Christmas vacations to Chicago. I know you won't brag, but if you could pick out one thing, what have you done differently that has helped you survive all these years?

The first gentleman paused and said (to the best of my flawed recollection), "You know, we have always been afraid of taking on too much debt." I assumed when he said "we" he was referring to a family operation. "There have been years we probably could have expanded more than we have, but we stayed conservative."

I asked, what kept him from overspending when corn prices were high, like in 2008? He said, "We sold some corn near the high, but we also sold a lot of corn at $4.00 that year." As he spoke, there was no hint of regret, and he added, "$4.00 at that time was a good price."

As I was thinking about his comments, the second fellow jumped in, "I am a fourth-generation farmer in our family, and I always heard from an early age that the third generation loses the farm -- I was determined not to be that guy." He also mentioned an article he read many years ago, which he kept and still reads, offering down-to-earth advice about farming for the long haul.

The third fellow at the table said he has a background in finance and accounting and has always kept close tabs on the numbers. He says it bothers him when he talks to farmers that don't know their numbers, and it makes him shudder when he hears about big loans that have little chance of working out.

At this point, I'm pretty sure my mouth was hanging open as I realized that all three men from different parts of the country just answered a spontaneous question with the same Midwestern message of temperance and frugality that many of us learned growing up, either from an Aesop fable or sitting on a wooden pew Sunday morning.

Don't get me wrong, I am not casting stones at anyone struggling in these tough times, and sure, there are many factors that go into whether a particular farm makes it or not. Even so, I was fascinated that these three survivors all displayed what I would call a healthy respect -- maybe even a tinge of vigilant fear -- for the ups and downs of life and consciously chose to stay on the cautious side.

For the record, the fourth and final grower at our table was one of those indomitable spirits that comes along once in a blue moon. He was born with so much energy and vinegar that you could parachute him into the Amazon rainforest and he'd find a way to come out on top. That's a quality that can't be taught, and it made for some fun stories.

Here in the fourth consecutive year of low corn prices and anticipating possibly a billion bushels of U.S. ending soybean stocks, it is easier to see the value of not getting swept up in the euphoria of good times. The challenge is to remember these lessons when the party seems so alluring. For me, Harrington's timeless wisdom and the sage advice from a Tuesday morning breakfast are the kinds of things we all need to keep tucked in our caps.

Todd Hultman can be reached at

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Todd Hultman