The last two months have been especially tough on the cattle market. The markets suffered financially, but traders and cattlemen also suffered mentally as they expect so much prosperity out of the market in the first quarter. If losses were $5, they felt like $10 losses because most cattlemen expected $5 gains. But, other than hearing your local radio station talk about the markets being lower, and the scare of the coronavirus spreading, have you stopped to wonder what really has happened? What the facts are and what emotions are overdone?
Our culture thrives on news, thrives on movement, and thrives on constant buzzing. In order to keep peddling new posts, new data and new information, something has to be noteworthy to share. Various media, including social media, internationally caught wind that there was a virus spreading that could grow to be influential. Before doctors could even learn more about it and recommend the best ways to deal with it, fear of this virus turned it into a monster. The Beef Basis founder, Brett Crosby, said, "Every big move always gets overdone."
And a big move it became. Between Jan. 10 to Feb. 28, 2020, the April feeder cattle contract fell roughly $17.35. In the same time frame, the April live cattle contract fell from $127.95 to $107.57 -- a $20.38 loss in just roughly two months. Many analysts wonder if the bottom of this trend is truly in yet and question the market's movements daily.
But as producers look and evaluate this situation for their own sake, there are three things they may want to consider. First, be disciplined and strategic in their own market planning. Second, do not panic. Third, now that the market has gone lower, producers need to prepare for the market to go higher.
It is crucial in emotionally charged times that producers make and stick to their marketing plans. To some folks, "making" a marketing plan seems taboo and far-fetched when they have typically just waited and watched for when the market seems to trade higher -- and then the next week they sell their calves. This may have worked in the past, but as the market evolves and becomes more complex with more moving pieces, this type of system is bound to fail. This past year has taught us all that risk and volatility are a part of the marketplace. So, as producers move forward, managing that risk is going to become even more important.
If making a strategic marketing plan for your operation seems daunting, I would highly recommend talking to the folks you do business with regularly in your region. Talk to your local sale barn, talk to your local video representative, and it wouldn't hurt to look at the price differences of surrounding areas, too. As the market changes and evolves, producers also have to evolve -- don't be bashful, ask questions. The questions you ask yourself are often the questions others are asking, too.
Second, don't panic. Have you even been in a situation where panic has helped? When the market seems to unravel at its core, stop the chaos and don't jump on the band wagon. As DTN Lead Analyst Todd Hultman always says, "We have to remember that markets are people and people are emotional." Yes, the illness called COVID-19 has surfaced and is something that deserves attention, but the market has blown the current situation out of proportion, driving fear and chaos into a market trying to ride out and settle down during this emotional rollercoaster.
Lastly, as market participants, the next question always needs to be,
"What next?" We know that the market fell sharply lower and there is still a chance that the market could go even lower. But once the market hits its bottom, what are you going to do? The key is to take the time to set yourself, and your operation, up to be able to capitalize on the next market move.
There's no doubt in times like these it would be nice if the cattle market was only a matter of cattle. But, if you can detach yourself from the emotion currently steering the market, you'll have a firmer grip on directing your business and earning your profits when the market climbs once again.
ShayLe Stewart can be reached at ShayLe.Stewart@dtn.com
Copyright 2020 DTN/The Progressive Farmer. All rights reserved.