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Market Scenarios and Dynamics

Cattlemen’s College® speaker encourages attendees to focus on production and anticipating market changes rather than on price.

Volatile global markets often force beef producers to predict a force as uncontrollable as the weather for hopes of a bigger payday. However, one agricultural economist at the 2014 Cattle Industry Convention & NCBA Trade Show in February said outproducing competitors and anticipating quick market changes are the ways to maximize profits.


While preparing Cattlemen’s College® attendees on Feb. 4 in Nashville, Tenn., for dealing with volatile global markets, Wells Fargo Economist Michael Swanson said anticipation is key.


“You cannot forecast the price, and it’s not important to forecast the price,” Swanson said. “What you need to do is anticipate.”


Swanson worked for 14 years at Wells Fargo as an economist and consultant, while also developing risk-management strategies for customers. His solution for overcoming unstable markets was simple and frank.


“You can’t beat the market. You can’t outguess the market. You can’t outguess the guys in Chicago. It’s never going to happen,” he said. “But you can certainly outproduce them.”


Sales are often determined based on production within the region. Good land means higher prices, he said, adding that a good way to evaluate production is to benchmark yields compared with county and state averages.


“If you grow 160 (bushels per acre) corn when the county average is 130, you’re a pretty good producer,” he said. “The same is true with every aspect of business. What’s your comparative versus your competitive investment strategy?”


Swanson challenged producers to evaluate their competitiveness in the market and analyze the global market as an investment, rather than rely on stock prediction.


“You guys aren’t traders,” he said of the producers in the audience. “You are investors. Everyone in this room has a multi-year or multi-decade approach to being in agriculture; that is the difference maker.”


Swanson emphasized the importance of understanding the cycle of global grain markets, adding that “the price of grain will always bring in more supply or limit more demand.”

“What do we say to ourselves every single day?” he asked. “High prices cure high prices and low prices cure low prices.”


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Editor’s Note: Raney Lovorn is a student in agricultural sciences and natural resources majoring in agricultural communications with an animal science option at Oklahoma State University.



 

 

 

 

 

 

 

 





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