A Record Brand Year Is Not Your Year

When the brand puts out a headline about 1.235 billion pounds sold and demand at a 40-year high, every cattleman should feel good for about five minutes and then go look at his own books. Strong demand helps. It does not write checks. This piece walks through the reported numbers and what they should and should not change on your place.

What was reported

According to Oklahoma Farm Report, global sales hit 1.235 billion pounds. Retail moved 525.8 million, foodservice more than 417 million and international 179 million. The brand reported demand for beef at a 40-year high even with the average retail price at $8 per pound. It also reported certified carcasses at 5.77 million, down 2.9 percent from the prior record, with an annual acceptance rate of 37.6 percent. The American Angus Association ran a version in its Angus Beef Bulletin. Remember these are the brand's own figures.

What demand actually is

Demand is not volume. It is what people will pay at a given price. When demand is strong, the same pounds sell for more or more pounds sell at the same price. The USDA Economic Research Service keeps the data series on cattle and beef if you want to look past a press release.

Why the supply side matters more to you

Here is the part that deserves attention. Sales grew while the number of certified carcasses slipped. That means demand is pulling on a supply that is not growing. When supply is tight and demand is firm, the people who can deliver the cattle the market wants have leverage. That is you, if your cattle fit the window. Prime sales were reported at 55 million pounds, up 9.7 percent, and more than 783,000 carcasses qualified for CAB Prime. The top end is growing, but it is still a narrow door.

Why a good year at retail may not be a good year at the ranch

• Costs. Feed, fuel, fertilizer, interest and labor all move too. High calf prices can be eaten by high costs.
• Replacement prices. If you are rebuilding, the same strong market raises what you pay for females.
• Timing. Prices you see in a report are history. Your calves sell on the day they sell.
• Quality discounts. A strong market does not hide a carcass that misses the window.

What to do with good news

1. Run your breakeven. Know the cost to raise a pound of calf. Our piece on where the money goes per cow is a place to start.
2. Lock in what you can. If a contract or forward sale covers your costs with a margin, think hard about taking it.
3. Do not stretch. Buying land or cows at peak prices puts you at risk if the market turns.
4. Fix the genetics. Premiums go to cattle that make the specs. farm.fm's page on marketing your Angus beef helps connect the dots.

What a record means for the next cycle

Markets that run hot tend to bring more supply, either through more heifers kept back or higher feeding intensity, and more supply cools prices. Nobody can time that for you. What you can do is keep costs in line, keep the herd productive and avoid debt that only works at the top of the market. The Beef Research site collects studies on demand and consumer preferences if you want more than a press release.

Straight talk

A hot market is a gift, not a plan. Use it to pay down debt, fix fences and buy better bulls, not to assume the good times are permanent. Check the numbers against the original source before you repeat them at the coffee shop.

Reading a market report like a banker

Your banker will read the same headlines you do, and he will ask harder questions. Be ready for three. What does it cost you to produce a pound of calf? How much of your calf crop makes the premium windows, and how often? What happens to your cash flow if prices drop by a fifth? Answer those with your own records, not with brand totals. A good year at the national level is a reason to talk to him early, while you are in a strong position, about terms, operating lines and what you will do if the cycle turns.

It also pays to compare channels. Selling on a grid, selling at the barn and selling forward each carry a different mix of risk and reward. Write down what each would have paid on your last three calf crops. Many men find the best option is a mix: part of the crop sold forward to cover costs and part left to ride the market. That keeps you from betting the whole place on a single day's price.

Finally, keep your eye on the long game. Herd rebuilding, drought and trade all shape the supply side, and none of them show up in a press release about retail sales. Read widely, keep your own numbers sharp and treat any single headline as one data point.

For ranch and farm supplier listings, see Agriculture Directory. This site is independent and not affiliated with the American Angus Association or Certified Angus Beef. Figures come from industry reports and can change.