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New Cattle Trends You Must Know

Market has a new playbook.

The old corn price/feeder calf price inversion is dead. So, then, have other things changed.

In last year's big move up and then down, corn and feeder and live prices moved in concert, says Randy Blach, Cattle-Fax general manager.

"These markets have changed," Blach says. "They're so much more dynamic and so much more global than they've been. This market has a new playbook."

Cattle-Fax projects when all the numbers are in, cattle operations will have lost more than $800 million in equity loss through the end of 2008. And it will have been particularly bad for those who weren't using risk management, Blach adds.

Several important trends are emerging, Blach says.

Excess capacity in feeding operations has come to a head. Fewer feeding companies will finish more cattle. More of the excess capacity will idle or close.

Right now, 10% of cow-calf operations control 50% of the cattle. The nation steadily loses cow operations every year. That doesn't look like it will change.

Funds will continue to participate in agricultural markets and that outside money will be ultimately good in the market. Yes, they add to swings, but the market liquidity they provide is good.

Pricing in these new markets changes too quickly. Those who try to wait for highs get slaughtered. The industry must focus on the margin instead of looking for market highs.

The time has come to appoint someone in your operation to take charge of risk management and to focus on those margins.

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