The cattle market turned a corner during Labor Day week, with feeders finally pushing back up the price hill.
Eric Relph, a cattleman and a risk management specialist at Commstock Investments, watched feeder cattle cash improve daily throughout the holiday-shortened week. The index jumped $3 on Wednesday’s higher-volume sales and then added an additional $2 by Thursday
Looking at data and market movement, Relph was willing to jump out of the chute with a positive message for in an interview recorded nearly a week ahead of the Sept. 16 episode of Ag Marketing IQ In Depth.
“The tide has turned,” Relph said, predicting fed-cattle cash would follow the same upward trajectory.
The evidence was clear in the numbers. Feeders were holding cattle, refusing to let them go at lower prices, something the market hadn’t seen recently.
“Feeders are holding these cattle. They’re not willing to let them go at lower prices, which is something we haven’t seen in quite some time,” Relph said. “The last two months, the packers have had the upper hand. Now, I think the tide has turned. We’re seeing that a little bit on the board as well.”
But Relph cautioned that unprecedented volatility now defines the livestock sector. Information spreads instantly, and with so many dollars at risk in this cattle cycle, traders watch every potential market-moving factor — from Choice box beef prices to social media posts from political leaders.
“If you buy them on the right day and buy your corn on the right day and sell your cattle on the right day, you can make $300, $400 a head,” Relph said, recalling a conversation with a large cattle operator. “If you buy them on the wrong day and buy your corn on the wrong day and sell your cattle on the wrong day, and you could be two weeks apart on any one of those given steps, you could be losing the farm.”
The solution? Relph recommends cattle producers know their production costs and protect against downside risk, even if it means sacrificing some upside potential.
Relph pointed to Livestock Risk Protection insurance as one tool to consider that can be valuable in certain situations. Unlike traditional hedging, LRP doesn’t generate margin calls, and premiums aren’t due until cattle sell, making it cash-flow positive for producers.
He also advised cattle producers to watch opportunity costs on their own grain, especially with new-crop basis around 40 cents under while old-crop was trading at par or positive. Some operations are already railing corn from Iowa to southwest Kansas and the Texas Panhandle to supply big feedlots.
Looking ahead, Relph sees a potential marketing opportunity developing in the late fourth quarter or early first quarter — a timing cycle high that producers need to capture given the serious money invested in today’s cattle.
For the full interview, watch this week’s Ag Marketing IQ In Depth.