When you look at the Cattle Range graph below, you will notice that all segments of the beef production chain are receiving record-high prices. Therefore, it is easy to conclude that all segments of the beef production chain are profitable – but that conclusion would be totally wrong!
Notice on the graph above that calf prices (blue line) are going up much faster and higher than the feeder prices (green line) – and that the feeder prices are going up much faster and higher than the fat prices (red line). This makes it nearly impossible for the beef production segments beyond the cow-calf level to be profitable. All segments are receiving record-high prices – but only one segment is profitable.
The only winners are the cow-calf producers in this situation. Everyone else is a loser. However, as more and more heifers are retained and added to the cowherd, beef supply will eventually surpass demand. When that happens, calf prices will crash without warning just like they did in 2016. At that time, cow-calf producers will become big losers – and all of the other segments will become winners. Please take note of the quote below.
Quote Worth Re-Quoting
“Manage the good times so you’re ready for the bad times.” ~ Herb Kelleher