Call the Market

At this point, it's no far-fetched thought to say the cattle complex is changing and some of the market's expected seasonality, or typical/expected dynamics, could be changing before our eyes.

One specific dynamic that's been talked about a lot is the potential change in the cattle cycle. For decades, cattlemen have been able to track the cattle market as it's religiously traded in a consistent 10-year time span where seven to eight of the years favor feedlots and packers, and the remaining two to three years are when cow-calf producers hold the lion's share of market leverage.

But with the expected slow build back of the U.S. beef cowherd, many are beginning to believe the typical time span (two to three years) in which cow-calf producers reap the benefit of a strong market could be longer this time around, as the cow herd isn't anticipated to grow rapidly once the build-back phase is indeed initiated.

But the other change we may notice this year is starkly fewer receipts at sale barns this fall. And while that seems pretty straightforward because of the fewer number of beef cows in our marketplace, the thought deserves additional consideration.

For instance, of the big, online video auctions that have been held thus far this year, higher receipts have been noted across all the major video auction companies. But to be specific, at the Corn Belt Classic this year, there were 104,000 head of cattle consigned to the sale, while last year there were just 54,000 head of cattle consigned to the sale. And then at Superior's Week in the Rockies sale, the same type of trend was noted as last week there were over 300,000 head of cattle sold on the online video sale, and last year there were 290,000 head marketed through the sale.

It's easy to understand why producers would be eager to market their calves in this red-hot, record-breaking market; but to what extent is this change in the market's typical realm going to have on the complex? We know supplies are undeniably thin and not going to become flush or burdensome anytime in the near future. So, will prices remain this strong all the way through the fall even though historically prices soften in October when sale barns are flooded with spring-born bawling calves? Time will have to tell.

Given the historical prices at which calves are currently trading, I personally believe managing risk is one of the single most important factors for this year's market. Prices are higher than they've ever been, which means volatility isn't lurking far behind. Capitalize on this strong market, friends, and manage your risk like your ranch depends on it -- because ultimately it does.

ShayLe Stewart can be reached at shayLe.stewart@dtn.com

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