There seems to be nothing easier in our business than looking for the negative. In fact, livestock producers almost seem hard-wired to think that way.
Here’s an example: Indicators show demand improving, numbers are tighter, we have higher average prices than a year ago – that’s all good news, right? What’s more, the predictions for the upcoming Cattle on Feed report are all bullish – on-feed numbers down by 1%, April marketings are projected to be down nearly 2%, and March placements down 4.4%. Yet, the futures continue to lead the market downward; despite hefty cash-to-futures premiums, the market continues to be pressured.
Of course, the bad news that drove the market higher was bad news for the poultry industry. It was the confirmation of the highly contagious avian influenza H5N2 in Iowa, and the news that 3.5 million hens had been depopulated. This is the broadest outbreak of avian influenza in over 20 years.
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Like most negative news, it probably isn’t as bad as is being reported. The protocols are excellent and containment of this disease in the U.S. is very doable. Meanwhile, the risk for humans is minimal. The effect on beef demand, and poultry demand, should be marginal. And the impact on poultry production in the long term (long term in the poultry business is short term from a cattle producer’s perspective) is also not expected to be significant.
The reality is that the markets, especially right now, are programmed to react to negative news, even if that negative news drives beef higher. It’s hard to escape the irony of the fact that the market has been trending lower on good fundamentals because of the widespread belief that the “high is in.” Yet, it rallies on what is likely to be an overreaction to another sector’s bad fortune.
It is one of the great dichotomies of the cattle industry that in order to be involved in it, you almost inherently spend most of your time focusing on the negatives. Other industries talk about marketing, and it’s usually referring to gaining market share, increasing demand, and selling your product at higher margins. In our business, marketing is usually focused more around risk management than anything else.
I’m not saying that managing to avoid negative outcomes is the wrong philosophy in the cattle business. My herd health programs, my nutritional programs, even my genetic selection is influenced in large part by the desire to avoid problems and eliminate negative outcomes. However, I can’t help but wonder if we wouldn’t be better served by managing for positive outcomes rather than avoiding negative ones.
I’m going to try an experiment. Today, I’ll only talk about the positive. My sole focus will be on creating positive outcomes rather than eliminating negative ones. If I make it through the day, I’ll let you know if I managed any differently. Of course, it would be kind of fun to conduct this experiment on a wider basis; anyone out there willing to join me?
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