This is where market makers come in, undermine and bypass the cash cattle market. The feedlots knew the prices were higher and their cattle were worth more, but when the bids start to fly and the clock ticks, anxiety becomes an unbearable beast to fight. If you looked any feedlot manager straight in the eye and asked him if he truly believed the Holstein-Angus crossbred pen fully represented his best stock and value, he couldn’t answer without affectation. This is the dangerous cost of market starters.
The fattened cattle market is a machine like no other. His ways of buying, selling and trading cattle couldn’t be more different. There are cattle that sell in the cash market, there are cattle that sell under grid/formula agreements, and there are cattle that sell under marketing arrangements alternatives (AMA). In this industry, however, we tend to be narrow-minded, wondering how many cattle were sold for cash last week, what are the details of someone’s network contract, and how many cattle were purchased with the time. However, perhaps the most important question that gets overlooked is: what launches the market and sets the tone?
The monotonous nature of the fed cattle market rarely changes. At the start of the week, buyers collect show listings from feedlots. Then on Mondays, and sometimes Tuesdays, buyers try to get out and look at the paddocks. Then, usually on Tuesday afternoon, or sometimes on Wednesday, the lowest offers start to be rejected. An anxious or nervous feedlot manager will jump at the first market offer and justify the $3 ding by saying, “At least I’m guaranteed to have space for the shackles, isn’t it not?” And when played by the rising cost of wins and all the other inputs, it’s easy to see how a guaranteed bid (even if $3 cheaper) comes with some comfort. But from then on, when slaughterhouses get their first batch of purchased cattle at a lower price, the rest of the market has its work cut out. Seasoned feedlot managers know that nine times out of 10, “market starters” are the most dangerous and costly trick played in the fed cattle market.
As Ken Betschart, Consolidated Beef Producer’s marketing representative for western Nebraska and Colorado, put it, “Packers may not even like the market starters they buy. the least sought-after enclosures on the market, and they are an immeasurable tool for packers, as these sales set the tone for the entire market. »
If cattle that rank 15-20% lower than the market’s best are setting the market tone, it’s clear that feedlots that source quality genetics are being cut short. Throughout the week, you may hear that prices have fallen, but you rarely see prices rise throughout the week, which amplifies the importance of setting a strong tone from the start.
This brings me to my next point: how do you avoid having to sell your best cattle at the prices set by market starters?
Brodie Mackey, director of program development for Consolidated Beef Producer and regional manager for Nebraska, Iowa and Colorado, said, “In 2013, 2014 and 2015, if you wanted to eat, you could hardly take a bad decision. But in today’s market, you have to watch two things: the market cycle and the leverage signals.” Given the drastic pace at which we’ve seen beef cows slaughtered, there’s no doubt that the cycle of market is changing and leverage is about to favor the sellers again.Even when the pendulum swings and feedlots possess greater market clout, then it will be as crucial as Now is the time to understand how packers use market starters and how to position your cattle to ensure they receive the prices they deserve.
Livestock feeding and marketing is not for everyone. Corn prices can skyrocket, transportation costs can suck all the profits out of any business, and small business tricks, such as understanding market starters, can be hard lessons to learn. However, sharing these lessons so fewer cattlemen are misled is my goal. While not all cattle pens are the best on the market, believing that market starters are a true representation of the market is also a mistake, and a mistake that comes at the expense of ranchers.
ShayLe Stewart can be reached at [email protected]
(c) Copyright 2022 DTN, LLC. All rights reserved.