Speer: Guarding Against Defeatism

Cynicism:  There’s never any want for cynicism within the beef industry.  For example, there’s this one-two punch below.  It begins with some analyst commentary and then subsequently gets reposted on social media by one of the cattlemen’s groups (with added color): 

Solutions:  The primary complaint here being the “disconnect” between cattle and wholesale beef prices. They exist and operate as two independent markets. Nevertheless, IF that’s a primary concern, several viable options are available:    

1. 1. Invest in a packing company and thereby capture some of the perceived value “disconnect” highlighted above.   That’s precisely the goal for ventures like Sustainable Beef (North Platte) and Producer Owned Beef (Amarillo).  
   2. Market cattle on a grid.   It enables cattle feeders to get closer to the cutout and take advantage of value opportunities not available otherwise.  (see Real Money for Real Value)

The irony in all this being many who complain about “disconnect” are the same ones lobbying to sell a greater proportion of cattle on a live basis – thereby moving away, versus getting closer to, the cutout. 

What they didn’t tell you:  While the market snapshot above may seem significant, there’s some context that got left out.  For instance, it doesn’t mention the year started off with feedyard inventory totaling 11.7M head – 10% larger versus January ’15 (10.6M head).  

Moreover, since that commentary was posted, there’s been no follow-up as to the market (because it doesn’t fit the “disconnect” narrative): 

1. January ’23 marketings totaled 1.85 M head – 14% bigger compared to January ’15 (1.63 M head).  Meanwhile, January ’23 fed cattle averaged $156.²⁷ – only 5% below the average in 2015 ($164.⁵⁶)
2. Moreover, by February, the cutout had receded $18, while fed prices remained steady-to-$1 better.   
3. Fast forward to mid-March, feedyards have captured an additional $8 while the cutout has gained only $3.
4. And in summary, feedyard revenue in January and February totaled $7.85 B versus only $6.93 B in 2015.  

Guarding against defeatism:  All that aside, what really matters is the broader approach to business.  Note that “disconnect” gets thrown into the hopper with “inflation, globalization and the power of packer concentration.”  It’s all trending in the wrong direction.     

Meanwhile, the export market enabled the beef industry to capture nearly $12 B in 2022 (a new all-time record) – the equivalent of $500+ for every fed steer / heifer marketed in the United Sates.  Moreover, packer concentration is essentially unchanged over the past 20 years.    Finally, none of the claims fit the reality of the favorable things occurring in the beef business.

Given that, there’s an important theme to all of this. Back to the start, a healthy dose of cynicism is said to be a good thing.   But that can easily morph into defeatism. 

And when that occurs, it’s paralyzing.  Everything is wrong, and nothing is right. Hence, we get stuck; seemingly, there’s nothing we can do that will make any difference.  To that end, it’s critical to constantly guard against such, lest it pervade your decision making. After all, it can be a self-fulfilling prophecy.  

A.L. Williams says it like this, “I’ve spent a lot of my adult life studying men and women and why most of them lose and only a few win.  It took me a long time to really understand what a big part attitude played in success.” 

Nevil Speer is an independent consultant based in Bowling Green, KY.  The views and opinions expressed herein do not reflect, nor are associated with in any manner, any client or business relationship.  He can be reached at nevil.speer@turkeytrack.biz.