What’s worse than no cattle futures?

Live Cattle futures have become so disconnected from any semblance of reality that their usefulness to cattle producers is suspect at best and damaging at worst.

The Essence of Liberty: Volume I: Liberty and History: The Rise and Fall of the Noble Experiment with Constitutionally Limited Government (Liberty and ... Limited Government) (Volume 1)  The Essence of Liberty: Volume II: The Economics of Liberty (Volume 2) The Essence of Liberty: Volume III: A Universal Philosophy of Political Economy (Liberty: A Universal Political Ethic) (Volume 3) The value of cattle futures has long been a topic of discussion in cow country. Is it time for the beef business to again kick the hornet’s nest?

Remember that old saying? The one about if you love something, let it go? Maybe it’s time for the cattle business to do a gut check and find out just how much we love the futures market.

That seems to be a growing sentiment in cattle country. Live Cattle futures have become so disconnected from any semblance of reality that their usefulness to cattle producers is suspect at best and damaging at worst. And Derrell Peel, Extension livestock marketing economist at Oklahoma State University, recently wrote about frustrations with Feeder Cattle futures.

Feeder futures have become increasingly volatile in ways that often appear unrelated to market fundamentals. Erratic futures price movements and increased basis volatility makes it difficult or impossible for the industry to use feeder futures for its two primary roles of risk management and price discovery,” Peel says.

I have, for all of my nearly 40 yards as a very interested observer of this business, defended cattle futures as a necessary part of the overall dynamics of our market. And I have, over those many years, lost a few readers because of it. So be it.

However, the seemingly irrational actions of the futures market gives cause for pause in that thinking. I fully admit that I am not a student of the futures market. I don’t follow it closely, don’t understand it well and have traded cattle and grain futures only sparingly, and that was many years ago.

But a recent Economic Letter from the Dallas Federal Reserve caught my eye. Its title is “Stock Market Provides Imperfect View of Real U.S. Economy” and it says that the stock market, through measures such as the Standard and Poor’s 500, is often thought to be an economic bellwether. However, market volatility compromises the reliability of such indexes.

I don’t know if we can draw parallels between the stock market and the futures market. I’m not an economist. But it’s clear that volatility in cattle futures has compromised that market’s ability to be an economic bellwether for beef producers and the beef business.

Is it time to seriously discuss whether or not cattle futures have a place in the beef business? I think it is.

A Handbook for Ranch ManagersA Handbook for Ranch Managers.  In keeping with the “holistic” idea that the land, the livestock, the people and the money should be viewed as a single integrated whole: Part I deals with the management of the natural resources. Part II covers livestock production and Part III deals with the people and the money. Not only would this book make an excellent basic text for a university program in Ranch Management, no professional ranch manager’s reference bookshelf should be without it. It is a comprehensive reference manual for managing the working ranch. The information in the appendices and extensive bibliography alone is worth the price of the book.

You might also be interested in the supplement to this Handbook: Planned Grazing: A Study Guide and Reference Manual.

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About Land & Livestock Interntional, Inc.

Land and Livestock International, Inc. is a leading agribusiness management firm providing a complete line of services to the range livestock industry. We believe that private property is the foundation of America. Private property and free markets go hand in hand—without property there is no freedom. We also believe that free markets, not government intervention, hold the key to natural resource conservation and environmental preservation. No government bureaucrat can (or will) understand and treat the land with as much respect as its owner. The bureaucrat simply does not have the same motives as does the owner of a capital interest in the property. Our specialty is the working livestock ranch simply because there are so many very good reasons for owning such a property. We provide educational, management and consulting services with a focus on ecologically and financially sustainable land management that will enhance natural processes (water and mineral cycles, energy flow and community dynamics) while enhancing profits and steadily building wealth.
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