Markets Holding Despite Ukraine Black Swan Event
By Jeff Rose
Many cattle marketing analysts have been wondering what the next Black Swan event could be. On February 24, as the first missiles launched over Ukraine, we had our answer.
I believe COVID-19 has had a long tail affecting cattle markets. But now, the Russia-Ukraine war is impacting agriculture as well as other sectors, and we could see the effects as far as a couple of years down the road.
Near-term impacts are obvious, as higher input prices and uncertainty hit our operations. Long-term it appears that many Ukrainian farmers could miss an entire growing season. That is a lot of production out of the marketplace.
Here at home, the packing industry seems to be finally putting COVID-19 in the rearview mirror. Kills have been steady with less disruption now that quarantines are behind us.
Many processors are working six days a week at times, because they are making good money. Not as much money as a year ago, but certainly more than $200 per head.
The supply side of our equation though, does not change quickly and the cattle herd is in a contraction mode. However, slow kill, drought and feeder cattle imports impact on-feed numbers.
Currently, we have plenty of cattle on feed. Every time it looks like we are getting to a hole in numbers, it seems like a COVID-19 variant slows the kill rate down and backs up cattle as a result.
Demand is always the wild card. How are consumers going to spend their dollars that are worth less now that inflation is rearing its ugly head? Will they continue to buy beef at higher prices? Or, will it take all of their discretionary money to fill their gas tanks?
These issues and more, are all out of our control. And the answer is price risk management. Use our tools today.
