I really like this time of year. Not only do you have opportunity to put 2023 to bed, but you have the promise of 2024. There is something exciting and invigorating about a new beginning. While this is a universal experience, it is especially true for ranchers, because there are so few clear beginnings. Ranching is a continuous, never-ending, ongoing process. The genetic decisions you make in 2024 will have ripple effects for decades, as will your marketing and management decisions.

While it is true that every day is a new beginning in one sense, it is also true that our future is like our integrity in the sense that our beginning point is determined by our past. Different starting points, though, do not determine our ultimate outcome. Some starting points are just a little farther back than others.

From a market standpoint, 2024 is starting out a little farther back than most of us anticipated. October and November placement numbers came in significantly higher than anticipated. As a result, November’s cattle-on-feed number was larger than the market was expecting (see last month’s “Market Closeout”).

The overall economy is sending mixed signals, as well. Inflation is coming back in line, but the ramifications of the price increases, coupled with higher interest rates, are starting to have their effect on consumer demand and attitudes. Not only have wages failed to keep up with the price increases, reducing disposable income, but the government stimulus that was a miniature lottery win for most households has been spent. Add to that two global conflicts with uncertain outcomes plus major geopolitical considerations. The overall economy would be best described as uncertain, rather than good or bad.

Everyone is trying to sort out what this means for beef demand in the long run. As a result, there is a lot of uncertainty, and that has left us with a mixed response. Most would agree the fundamentals point to a higher-trending market, but we have removed the optimism from the nearby market. The overall market sentiment is not bearish, but rather could be described as “I’ll believe it when I see it.” Caution is the word of the day.

Macro-trends

Those are the short-term macro-trends. We are also seeing some trends driving the cattle market in general.

Superior genetics are probably the best risk-management tool available to cattle feeders.

Without question, quality has become way more important in today’s market. We are seeing that through record price premiums for black-hided cattle and record price spreads within weight classes based on quality. This is significant. During times of tight supplies in the past, we have seen strong support for poorer genetics as cattle feeders and packers struggled to keep adequate inventories. The marketplace has changed.

Yes, throughput and capacity utilization remain vital, but the quality of those numbers has a bigger effect than the numbers themselves. This trend has been magnified by the increased costs of gain and the increased price spreads based on quality grade and the number of cattle selling on grids (see “Where’s the Ka-ching?”).

Price volatility also has forced cattle feeders to focus more and more on risk management as part of their buying strategy. Superior genetics are probably the best risk-management tool available to cattle feeders. This is a major shift in the economics of the cattle market.

Additionally, we must consider the lingering effects from COVID, which taught cattle feeders that market access is not guaranteed. This idea is coupled with the realization there is greater differences in profitability than ever before. This increased variation in profitability is a result of increased price differentiation and greater differences in genetic merit than we have ever seen.

When you combine all of these trends, the one trend I’m very comfortable in predicting for 2024 is that the role of genetics in determining prices will continue to grow significantly in 2024.

AngusVerified^SM and the Genetic Merit Scorecard^SM — offered through AngusLink^SM — are no longer just great options for progressive cattlemen looking to differentiate their genetics at the top end of the market from a pricing standpoint. They are becoming important tools for everyone’s marketing arsenal, giving them access to more markets and more buyers, while differentiating themselves. They are tools buyers are increasingly looking for to reduce their risk and increase their confidence when buying calves.

Editor’s Note: Troy Marshall is director of commercial relations for the American Angus Association.