Focus on What You Can Control- Good Advice from Dr. Derrell PeelTue, 12 Apr 2011 12:08:15 CDT
Oklahoma State University Livestock Market Economist Dr. Derrell Peel says that it's important for cattle producers to realize that we have a new playing field we are on- and Dr. Peel believes it will be around for awhile. He offers the following "first person" analysis that every cattle producer should read- and heed.
"For many years I have heard cattle producers say that production is easy and marketing is hard. At today’s record price levels, I would argue that the opposite is true and will be for some time to come. Most anything one has to sell brings a good value in the market these days. Producers need to focus on having something to sell and managing production to take advantage of the market opportunities today.
"It has always been true that producers had more opportunity to influence profitability by managing production and cost than by marketing. Nevertheless, there have often been market signals that encouraged cattle producers to emphasize certain production practices over others at various times. Historically, cattle cycles encouraged maximum cow-calf production on some occasions and emphasized retained ownership or stocker production at other times. The advantage of the current market situation is that there is no tradeoff in market incentives. The current market is rewarding any type of forage-based production so it makes little difference if a producer sells weaned calves, retained feeders or runs stocker in place of cows. For stocker producers, the market signals that much of the time in recent years limited feasible stocker systems to a narrow set of production (e.g. small beginning weights and limited total weight gain) have been replaced by expanded flexibility to choose a wider range of beginning weights. There is more opportunity to own cattle longer and take them to higher weights.
"In the current environment, almost anything works and producers should focus on what works best for them. Producers can choose production systems where they have the greatest production advantage and the greatest opportunity for profits. High prices are no guarantee of profitability but high prices, combined with production flexibility gives producer more opportunity to control their fate. Cost of production will certainly be higher and input markets are volatile. Producers must evaluate input use carefully and be prepared to adjust production practices accordingly. Business as usual now means not necessarily doing things the same old way. For example, the value of reducing death loss by one calf is significantly more at today’s prices, which means that the health program requires additional attention. High fertilizer and fuel prices make pasture and hay management more important. And high feed cost makes supplement management critical.
"I would not say that there are no marketing challenges but a focus on productivity, efficiency and production costs will pay the greatest dividends in this unprecedented market environment. Forage is worth more now and producers who can grow and manage forage most efficiently and market that forage efficiently through cattle will benefit the most from the current market situation."
Our thanks to Dr. Derrell Peel for offering this analysis of this week's beef cattle marketplace- a part of his weekly electronic newsletter called Cow Calf Corner.
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