What happened to the U.S.cattle cycle?

Chart Look Familiar?
Peaked in 1935 – 45 – 55 – 65 – 75 – 83 – 95 – 06
Question: What happened in each of the peaks and valleys?
Answer: Investors, ranchers, speculators drove the price up and down looking for that happy medium between demand and production. Demand and production caused major swings in inventory/price which attracted investors and speculators which in turn caused more peaks and valleys.
Look at every other evolving industry and I believe you will find the same thing, Peaks & Valleys.
The only difference is that the livestock industry is very unique in that the turnaround time for inventory reduction to expansion back to reduction is 10 years. Most other evolving industries can usually do a turnaround in 365 days or less.
Overview of the Cycle:
From the 1930s to the 1970s there were wild swings in each of the cycles.
From 1975 to 1995 those swings were just about as wild but they lasted 2-3 years longer.
From 1995 to 2008 the wild swings are no longer there and we have begun to flatten out the inventory. Demand has been on the rise and is now flattening out. Demand and Production are coming together. Once these 2 components come together there is less market volatility which in turn causes the speculators and investors to exit the business.


Where are we now?
The livestock industry is coming of age. It is finding its happy medium where demand & production are coming together. The industry economics is no longer driven by speculators and investors but rather by the production and demand components coming together.
This was inevitable. This would have happened sooner or later. It just so happened that it occurred now probably due to several circumstances like Ethanol, Global economics and US Dollar. Otherwise we may have gone through one more cycle before everything leveled out.
We are still going to have market volatility through the course of each fiscal year, yet our economics are going to be more in line with tradition maturing industries. The livestock industry is going to become more subject to global economics, US dollar, inflation, demand, imports, and exports.
Speculators and Investors will cause the markets to fluctuate through the fiscal year, but we will not have anymore 10 year cattle cycles.


What do we do now?
Management practices, on the ranch, are going to have to play catch up to our new market drivers. Traditional ways of how we look at our business are no longer useful and we must accept this as fact.
Acceptance is the hardest part.
Change is good, but now change is inevitable.
Those who have experience in the traditional business sector are going to be ahead of the game.
Those that are willing to look way outside their box will do well.
The things that have been taught in the traditional business schools can now be applied to the livestock industry.

The "NewAg" is here.

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