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High-Quality Cattle Help Provide Consistency In Today's Wild Cattle Markets

Volatility. Funds. Risk management. If you’ve heard cattle market commentary in the past few months, you’ve heard all of these….a lot. Kansas-based commodity broker Doug Deets, of Buchanan & Co., says the landscape is changing as rebuilding begins—noticeable gains in cowherd inventory will start to appear in 2016. 
 
High-Quality Cattle Help Provide Consistency in Today's Wild Cattle Markets
 
“Then, the multiplier effect kicks in,” Deets said. “You’ve got, you know, more cows, more calves hitting the ground, more beef production the following year, 18 months down the road. So, right now, though, we’re expanding a liquidating herd, so we’re just now making that switch from liquidation to expansion, and that’s why supplies have been so restricted this year. But beginning next year, you’ll gradually begin to see an increase in cattle supplies and beef supplies from up on the market. And it will exponentially increase every year after, as long as we continue in an expansion phase.”
 
That’s why index-fund investors have left the market. They see longterm lower prices. Commodity funds that lost money are looking for more lucrative ventures. And that’s why today’s cattle market presents unique challenges.
 
“What does a guy do?,” Deets said. “You know, if you’re in the business, you’ve still got to be in the business. And, it’s a difficult decision. I think you just basically have to stay with your plan. There’s not a real risk management opportunity right now. If you have to do something, you buy a minimum pricing strategy, like a long-put option, and leave the top side open to the market.”
 
Deets also says there is one constant that can help buffer some of the wild swings.
 
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