Disciplined hedgers protect themselves against noise and volatility – the very essence of why futures markets exist, and why smart feeders use that tool.
Whether futures markets are friend or foe often depends on our understanding of those markets and whether we can ignore the drama and use facts to make decisions.
Further discussion about cattle markets leads our columnist to conclude: producers are “prone to have high confidence in unfounded intuitions” and we often derive conclusions based on incomplete information.
Record packer margins were the tipping point to attract new capital to the business. There is now angst packer margins will be too low and these new companies won’t survive. But should we encourage government meddling?
Higher cattle prices have calmed much of the producer angst about the market not working. Now seems like a good time to analyze how we think about factors that drive prices.
Successful ranchers learn to remove emotion from a situation. They subsequently they double down on the cost management side while also becoming more focused on value-added marketing strategies.
Solid prices gains are not new to cattle markets. Solid gains have been ongoing for several years and the fed market has roughly doubled over the past 35 months, a clear sign the market is not “broken.”
Markets may be higher, but there’s inherently more risk with each calf crop over time. That reality means ranchers must implement sound business strategies to ensure successful decision-making going forward.
