By Jamie Martin
Cattle markets have gone through a turbulent period, shifting from strong gains in mid-October to steep declines only weeks later. Prices had been setting new highs, and the market seemed confident even when small amounts of negative news appeared. That confidence weakened when national discussions began about finding ways to lower beef prices. After that, the market became more sensitive to any information that suggested weakening demand or higher supplies, including talk of increasing beef imports and adjusting live cattle imports.
By November 14, the November CME feeder cattle contract had fallen more than $42 per hundredweight from October 16. Live cattle futures saw similar pressure, with the December contract falling almost $30 per hundredweight over the same period. These declines occurred even though the fundamental conditions of the cattle sector have not changed dramatically. Supplies are still tight, and demand for beef remains strong. Instead, the drop reflects how markets respond to uncertainty and how quickly momentum can shift after a long period of rising prices.
Earlier in the year, feeder cattle futures had risen more than 43 percent from January to mid-October, leaving the market in a position where it could adjust sharply. Even now, prices remain higher than they were at the start of the year, despite recent declines.
These swings have significant effects on producers selling fed or feeder cattle. Many seek risk management advice after prices fall sharply, but building a plan during a downturn limits available options. Futures, options, forward contracts, and livestock insurance can help manage risk, but they must be part of a plan created before major declines begin.
This recent period underscores why risk management must focus on the future rather than recent history. Producers should develop budgets that consider a wide range of possible sale prices, including declines that may seem unlikely. By doing so, they can decide what level of risk is acceptable and how much potential return they might trade for protection. Each farm has different needs, but all benefit from preparing for market changes. Markets will always respond quickly to new information, but a strong risk plan helps producers stay prepared.
Photo Credit: gettyimages-imaginegolf
Categories: National