I called On Pasture author John Marble on Monday morning to ask for suggestions about what On Pasture readers should know right now. I thought he’d tell me something having to do with grazing, or prepping for winter. But no, he told me about the cattle markets and why it’s especially important right now that graziers not lose their minds. Yes, prices are up, and folks might think it’s time to grow their herds. But at these prices, “A yearling heifer bought this year may never be profitable,” he said.
“We always think things will be different this time,” he said. “Maybe it’s irrational exuberance.”
Irrational Exuberance is a term coined by economist Robert Shiller who said, “Irrational exuberance is the psychological basis of a speculative bubble. I define a speculative bubble as a situation in which news of price increases spurs investor enthusiasm, which spreads by psychological contagion from person to person, in the process amplifying stories that might justify the price increases, and bringing in a larger and larger class of investors who, despite doubts about the real value of an investment, are drawn to it partly by envy of others’ successes and partly through a gamblers’ excitement.” (Wikipedia)
John added that cattle market cycles occur on a longer time scale, meaning folks who experienced the last down cycle are no longer in business and younger folks haven’t seen it, so they just don’t realize what can happen. But all you have to do is check out these graphs to see what markets seem to do over the long haul.
Here’s what cattle prices looked like from 1990 to 2015:
Here’s what cattle prices looked like from 2014 to today:
Then check out this week’s articles for more information on market cycles, tips for weathering storms, and links to additional resources and articles.
Thanks for reading!