The U.S. cattle market continues to steadily conquer each price mountain, market challenge and production disruption—seemingly on an unstoppable upward trajectory.
The cattle market could be considered “a freight train that nobody can stop," said Eric Relph, risk management advisor at CommStock Investments, speaking in an interview with Ag Marketing IQ In Depth.
"I don't know that Superman could get in the way of this thing at this point," Relph said. And yet, Relph also cautioned that markets often reverse when they seem invulnerable. Here are the factors that Relph sees contributing to this runaway market:
- Supply constraints are significant. The national herd size at "a 70-year low" following extensive cow culling during drought conditions.
- Mexican cattle imports have been halted due to New World Screwworm detections moving progressively northward in Mexico. "We went from 1,500 miles away to 750 miles away to 350 miles away" in a short time span, creating serious concerns about potential spread to U.S. herds despite preventive measures.
Corral livestock insurance
Given the risk of screwworm crossing the border, given the chances that something eventually will halt this bull run, Relph said producers should manage for risk.
“It's a scary, scary amount of money out there right now,” he said.
Livestock Risk Protection insurance, upgraded significantly in 2020, has emerged as an increasingly useful tool.
"It is deferred payment. It is government subsidized. There's a lot of advantages there. It's fixed cost. So, you're not going to have a margin call, like a lot of folks have had to do in the futures market of late," Relph said.
“You can protect unborns. We do have cull cow protection now as well. And we have Holstein protection, too,” Relph said. “So, we have a lot of ways to use the tool other than just feeder steers and heifers. That sounds like something I'd want to look at if I was a rancher.”
Hear more from Relph on Ag Marketing IQ In Depth.