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Manage the Risk

CattleFax economist shares tips for managing risk.

Managing risk is different than getting the best price, and a good risk manager recognizes that difference. That was the message CattleFax economist Ethan Oberst impressed upon attendees at the 2017 Range Beef Cow Symposium Nov. 29 in Cheyenne, Wyo.

No. 1 on his list of recommendations for managing risk is to calculate and know your breakeven. “If you don’t know your breakeven, I can’t help you with risk management,” Ethan Oberst told producers.

He encouraged producers to get their risk-management tools in order as the cattle cycle prepares to change.

“High prices are behind us,” he noted. “Profitability has peaked. Margins will narrow, but remain positive [for a time], but that’s going to change.”

No. 1 on his list of recommendations for managing risk is to calculate and know your breakeven.

“If you don’t know your breakeven, I can’t help you with risk management,” he told producers.

Additionally, he emphasized knowing animal inventory, and suggested that cow herd operations especially look at grazing some yearlings, which allows for stocking flexibility depending on changes in markets or available forage.

With regard to marketing, Oberst said knowing the seasonal market trends is one relatively easy way to employ risk management and capitalize on price upswings. As examples, he shared data that showed in marketing 550-pound (lb.) calves, the seasonal price trend indicates it may be more advantageous to market them via summer video auction as opposed to the cash market. Whereas, 850-lb. calves garnered similar prices on video and cash market, making either option viable.

The market for cull cows, Oberst shared, is “one of the most consistent seasonal price markets there is.” March through May or June present the highs, while October and November have the lows.

“Holding cull cows until spring can return $60 per head on average,” he added. “Managing risk on cull cows is one of the easiest ways to add money back to the operation.”

As additional risk-management tools, Oberst cited retaining ownership, using basis contracts, hedging and livestock risk protection (LRP) insurance. Learn more about the risk management services offered by CattleFax at https://www.cattlefax.com/.


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Editor’s Note: Kindra Gordon is a cattlewoman and freelance writer from Whitewood, S.D. This summary was written under contract or by staff of the Angus Journal, which retains the copyright, part of Angus Media’s online coverage of the event. To request to reprint this article, contact Shauna Rose Hermel, editor, at 816-383-5270. For full online coverage, including PowerPoints, proceedings and audio of presentations, visit the Newsroom at www.rangebeefcow.com. The Angus Journal's coverage of the event is made possible in collaboration with the event committee.



 

 

 

 

 

 





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