News, around the world, has been focused on the latest coronavirus (COVID-19) outbreak. Therefore, we thought we should share some of our thoughts from a little different perspective. Although serious in nature, I think we can agree the mainstream media has blown this thing way out of proportion. Unfortunately, the reason for some of this seems to be political in nature.
I must admit, though, that I had some concerns about my recent trip to Australia via LAX in Los Angeles. I did not wear a mask – but I did follow standard protocol to avoid contracting an infectious disease. Along with taking vitamins C and D, I was careful about what I touched and I washed my hands frequently. They say the incubation period for COVID-19 is five to 12 days. One week from today will mark the twelfth day since my return to the US. Stay tuned.
The end is in sight. It looks as though new cases of COVID-19 have peaked in China and are now decreasing – following the classic bell curve. Recoveries continue to increase. The same thing will eventually take place in other parts of the world. COVID-19, like all flu bugs, likes cold weather. Therefore, as the weather warms up in the northern hemisphere, we should see fewer and fewer new cases.
I have been a little surprised at the effect COVID-19 has had on worldwide markets. This, I think, is partially the result of the news being sensationalized and politicized by the mainstream media. Understandably, it is also the result of a decrease in travel and other activities. The fact that most of the world relies on parts and/or products that are “Made in China” is another reason the markets are hurting. There is a lesson to be learned here. We should never allow our wellbeing to be dependent on things (or countries) that are totally out of our control.
As you have probably noticed… cattle prices have been indirectly affected by COVID-19. Right or wrong, they seem to be responding to the uncertainty of the stock markets. Had it not been for the coronavirus outbreak, I’m pretty sure we would be seeing higher and higher cattle prices. Once the dust settles, this setback in cattle prices will soon pass. Beef exports for 2020 are expected to be at record-high levels. Beef supply has peaked and will soon be decreasing – while domestic demand for beef remains strong. A decrease in supply combined with an increase in demand will always create higher prices.
If you are a cow-calf producer, there is a valuable take-home lesson hidden in this discussion on the latest coronavirus outbreak. That lesson is that cattle prices can be negatively affected by many outside factors and events that we have absolutely no control over. Some of these effects are temporary, while others can last a long time. The only producers who can weather these storms are those who have very low production costs, as well as very low breakeven prices.
Because most PCC customers have been focused on increasing production per acre (profit) instead of on increasing production per cow (bragging rights), they have a breakeven price on the calves they produce that is less than half that of their neighbors. No matter how low calf prices go, they will continue to be profitable. I urge you to take this lesson to heart and start building a program that does not depend on high calf prices to be profitable.