At the Cattle Industry Summer Business Meeting, Senior Farm and Ranch Broadcaster, Ron Hays, spoke with Terrain’s Chief Research and Analytics Officer, Don Close. Among other things, Close has previously worked as a senior animal protein analyst at Rabobank, and as a market director for the Texas Cattle Feeders Association.
Coverage from the 2024 Cattle Industry Summer Business Meeting in San Diego is being powered by Farm Data Services of Stillwater.
“A couple of weeks ago, when we had the two-dollar steer printed in Iowa; I have worked my entire career to see a two-dollar steer,” Close said with a smile. “Out of curiosity, I looked at the percentage change of where fed cattle were trading when I started. On a nominal basis, fed cattle prices have increased 536 percent over the years I’ve been in the business, so that’s been a phenomenal run!”
Even so, Close is still firmly convinced that prices will continue to rise. “Seasonally, the rally probably extended a good three weeks longer than it normally would. The pressure on futures market that we are seeing this week – I think it’s time,” he explained. “The real beauty of the short-term market is not that we will necessarily go higher, but the tight supplies will keep a really, solid base in the market.”
He is expecting a late summer low in the $1.80 to $1.85 level which will provide a strong base to return to the $2.00 or better area for a fourth-quarter rally. However, on a long-term basis, Close said that he has yet to see any measurable signs of heifer retention.
As far as how producers are planning to prosper, Close said, “On the rare occurrence that the market gets to these kinds of new record prices, as an industry, I don’t think we ever take the time to slow down and appreciate them when they come. That said, with the inherent risk that is associated with this kind of market environment, if a producer is not willing to have some kind of risk management plan, I would say, ‘Don’t buy the cattle.’”
He makes this suggestion based on his belief that when considering profit opportunities for the margin operators and the first cost of all weight classes of cattle, it would be a tight squeeze for the operator trying to move forward.
Close says that Terrain is taking a closer look at the premiums for LRP products as opposed to the strike price of the premiums on the options and positioning themselves to work with clients on which options are better for them.
“I really like the LRP products because for the smaller and low-risk producers, it is an opportunity for them to participate with risk management that the futures market just didn’t provide opportunities for,” he said.
For a producer looking to expand his/her herd in today’s market, Close suggests that the producer buy the cows rather than the heifers because when the cow will provide a return on the investment that first year. Heifers might be two years out from providing a calf to sell.
As to whether or not demand is expected to remain strong, he said, “We have a number of measurements that we take on a weekly and monthly basis to determine demand, and we haven’t seen any slow down to the consumer’s commitment to beef during this time.”
He went on to admit that premium and specialty meats were slowing down in favor of middle meats, but the phenomenally high prices that we’ve been seeing on beef haven’t diminished at all.
“I think it’s fair to say that consumers are showing more sensitivity, more willingness to trade down,” Close said. “But the measurement of beef in relationship to pork or poultry, the consumer is absolutely with beef to this point in time.”
The Beef Buzz is a regular feature heard on radio stations around the region on the Radio Oklahoma Ag Network and is a regular audio feature found on this website as well. Click on the LISTEN BAR at the top of the story for today’s show and check out our archives for older Beef Buzz shows covering the gamut of the beef cattle industry today.
