Is This A Time For Optimism, Pessimism Or Realism?

When I started to bang out this week's article, there was material for a whole host of subjects sitting on my desk. Among them was the HBO special that aired this week and highlighted abuse at factory farms. There was the continued liquidation of dairy cows in the U.S. And there was the surprising strength of beef exports in the face of a deteriorating global economy. Obviously, the topics ranged from extremely positive to pretty darn negative.

In a choice between negative and positive, negativity tends to carry the day, which isn't totally unjustified. After all, we've been exposed to what’s turned out to be a never-ending stream of negative rhetoric for more than a year now, the result of which has destroyed consumer confidence and created a downward spiral that feeds upon itself.

The handling of this crisis isn’t helping much, either. Americans watch as Congress funnels tens of billions of their dollars into ill-run companies that respond by paying out hundreds of millions of dollars in bonuses to their inept leaderships. Thus, uncertainty and frustration aren’t surprising byproducts.

For the beef industry, the basic supply and domestic demand fundamentals have been outstanding. However, ethanol subsidies, droughts, BSE, global trade disruptions, exploding input costs and the like have conspired to turn what should have been glory days in the cattle industry into fairly marginal times. Considering that the average age of producers is approaching retirement, coupled with the uncertainty created by a global recession, it’s pretty understandable why producers are being cautious.

At the same time, however, optimism is also understandable. The global financial meltdown and resulting recession were created by government policy; thus, it’s correctable. Supplies are tight, demand is strong, and exports are increasing. By just about any fundamental or technical measure outside of those created by Mother Nature and/or the real-estate bubble and the resulting financial crisis, the situation is positive.

The realistic approach probably exists somewhere in between. Looking out a year or longer, the future looks extremely bright. But, in the near term, lowering costs and positioning oneself to take advantage of the good times ahead appears to be the prudent course of action.

Positioning oneself for the future means strategically investing today. It isn't a question of adopting a positive approach; it’s about taking a positive approach to actual facts (realism). We may not look back at 2009 as a year of historic profits, but looking back in five years, most producers will see 2009 as a time they positioned themselves for record profits, or failed to capitalize on opportunity.