Despite Unknowns, We’re Bullish Cattle Marketing
By Jeff Rose
Nate Kauffman, an economist for the Omaha branch of the Federal Reserve Bank of Kansas City, recently said that despite higher-priced inputs, interest rates and inflation, overall conditions for Midwest farmers right now are stronger than they were before the pandemic.
He also highlighted that many producers are in a good financial condition this year with very limited signs of financial stress.
Kauffman also pointed out before the pandemic, economists worried about an uptick in loan default rates. Now, loan delinquencies are at all-time lows.
After a strong summer cattle market, because of good demand and a shrinking cowherd, pessimism seems to be taking hold of the cattle futures.
Cattle on feed reports continue to show feeders moving into feedlots early off of drought-stricken pastures. This and concerns about demand going forward are feeding the bear market.
But exports continue to be a bright spot in spite of the strong dollar, and so far inflation hasn’t been enough to break beef demand yet. But we are talking about the future and speculation about recession and inflation does not make traders very bullish.
Along with higher interest rates, the dollar remains strong. These inflationary pressures could start to affect U.S. agricultural exports, so, there are definitely risks.
All this being said, the cowherd is still shrinking and on feed numbers will soon be down as a result. High corn prices should correlate to higher fed cattle prices also.
Labor right now remains a driver of inflationary pressure and it is affecting several agricultural industries.
I remain positive regarding the winter and early spring cattle markets. This could be the perfect cattle market, but like David Allen Coe might have sung, I haven’t said anything at all about trucking, plant fires, hackers, Ukraine or gittin’ COVID.
