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UKRAINE                                                                                    The Midwest Cattleman · March 31, 2022 · P10
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                                         through several scenarios.         Prices from Bloomberg show  of  the  past  few  weeks.  Last
                                            The immediate impact for  Brent Crude and WTI Crude  week, May feeder cattle fu-
      reacting to all of these.          grain markets is on old crop  trading at $105/barrel and  tures were down 7.5% com-
         Perhaps the most notice- cash and futures prices. Look- $103/barrel, a modest decline  pared to mid-February.  We
      able impact of the conflict in  ing at CME corn futures pric- from the prior week. Higher oil  can all think through the im-
      Ukraine, at least initially, is  es from March 9, the March  and natural gas prices mean  plications for cattle feeding
      market volatility. Uncertain- 2022 corn contract is trading  higher energy costs.  These  dynamics, hay production, and
      ty equals price volatility. The  at close to $1/bu over the De- higher energy costs will span  production costs for cattle pro-
      war in Ukraine presents mar- cember 2022 contract. Today’s  the entire beef supply chain.  ducers. Fortunately, the same
      kets with a significant degree  corn  market is an  inverted  It takes energy to run a meat  supportive supply dynamics
      of uncertainty.  As new infor- market.  An inverted market  processing plant. Transporta- that analysts have discussed
      mation arrives, markets incor- refers to a scenario where  tion costs for wholesale and  the past few months remain
      porate it into prices. What we  nearby futures contracts are  retail will increase. On-farm  in play.  Tight cattle supplies
      know today is different from  trading at a premium to de- fuel costs will also increase.                that we expect to get tighter.
      what we will know tomorrow,  ferred futures.  As my col-                Higher grain, fuel, energy,  Yes, this means we have fewer
      next week, next month, etc.  league  Andy  McKenzie  likes  and fertilizer prices will im- cattle to sell, but it also means
      Markets are trying to work  to say,  “an inverted market  pact inflation. Food and ener- higher cattle prices and the
      through that information. Ev- tells market participants that  gy are the most volatile pric- potential for improved profit-
      idence that markets are work- we want corn now!”                      es included in the Consumer  ability.
      ing.                                  There are also long-term  Price Index (CPI) which is
         Volatility makes it harder  concerns for grain markets.  one measure of inflation. Food
      to manage price risk. I have  Specifically, will farmers in  and energy prices are also the
      been asked several times  Ukraine be able to plant?  most heavily impacted by the                        HAY, FEED
      about what producers should  Even if Ukraine can plant a  war. So, it should be no sur-
      do to manage the price swings  new corn and wheat crop, will  prise that we will continue to             continued from page 3
      that we are currently observ- they be able to export? There  observe historically higher in-             generosity and deep values
      ing. Scenarios like this one are  is potential that the current  flation. The most recent data  of  Texas agriculture during
      why we use price risk man- conflict will damage Ukraine’s  shows inflation reaching 7.9%  times  of  need.  This  is  cer-
      agement tools.  This is simi- infrastructure, creating fur- in February. Because food and  tainly a situation where our
      lar to considering price risk  ther logistical challenges for  energy prices are so volatile,  neighbors and friends are
      management during March  grain exporters.                             a better measure to track the  needing assistance after los-
      2020. To be blunt, it is hard to      In 2021, Russia was the  price level in the economy is  ing some if not all of their
      manage price risk when you  largest net exporter of oil and  the CPI less food and energy,  livelihoods.”
      are in the middle of a high  natural  gas. Approximate- which is referred to as core in-                    Donation locations and
      price risk situation. There are  ly 4% of Russia’s crude oil  flation. Core inflation reached  contact information:
      still things we can do to man- exports were to the United  6.4% in February. The degree                     Primary  contact: AgriLife
      age elevated price risk.  The  States. Sanctions on Russian  to which inflation impacts  Extension’s donations ho-
      best advice is to be as flexible  oil and gas and the prospect of  consumer spending will de-            tline: 979-314-8200.
      as your operation will allow.  a complete ban on Russian oil  pend on, among other factors,                 Secondary contact: Gor-
      Put pen to paper and work  have sent oil prices surging.  whether the wage growth rate  man                        Milling     Company
                                                                            tracks inflation. We know that  Inc., Fiber Plant, 1200 E.
                                                                            inflation has outpaced growth  Townsend,           Gorman,      Red
                                                                            in wage rates over the past  Chain Feed Mill, Luke Fritts,
                                                                            few months. We expect chang-       254-734-2252.
                                                                            es in consumer spending.              A relief fund has also been
                                                                              There are no immediate  established               through      the
                                                                            beef export demand concerns.  STAR Fund Disaster  Assis-
                                                                            Russia is largely self-sufficient  tance through the Texas De-
                                                                            in meat production. The only  partment of Agriculture.
                                                                            concern for U.S. beef exports
                                                                            would be if other countries
                                                                            became  directly  involved  in
                                                                            the conflict. There are domes-
                                                                            tic meat demand concerns. As
                                                                            has already been mentioned,
                                                                            inflation will impact consum-
                                                                            er spending, provided wage
                                                                            growth does not track infla-
                                                                            tion. Consumers will also ex-
                                                                            perience higher prices at the
                                                                            gas pump. Consumers might
                                                                            be more hesitant to make that
                                                                            last-minute trip to the grocery
                                                                            store. As I’ve said in early arti-
                                                                            cles, beef demand will depend
                                                                            on what retail beef prices do
                                                                            relative to chicken prices, pork
                                                                            prices, and consumer income.
                                                                              Cattle markets have cer-
                                                                            tainly  reacted  to the events
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