Livestock has always been a tricky business because there are hundreds of variables that affect price and demand, but recent shakeups in the U.S. and around the world have made it even more unpredictable. New laws and geopolitical factors have a huge impact on these markets, and changes for one type of livestock can affect prices for another.

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Prices could tank or they could go up at any time. No one can say for sure, but you can keep yourself informed and protected to make sure you come out on top no matter what happens. I’m here to help you understand the issues and the different strategies available for protecting your hard work and income.

California’s Animal Treatment Law

The state of California recently passed a new animal welfare law designed to improve conditions on the farm for calves, chickens, and pigs. The new law calls for an increase in cage sizes for livestock, not just for producers in California, but also those who sell livestock produce to California. While most cattle and chicken producers haven’t complained, the hog producers are not happy.

Hog producers in Iowa who supply over a third of our country’s bacon are suing the state, saying it will take tens of millions of dollars to meet the new requirements and that the people who drafted the law don’t understand the implications it could have on the market.

Michael Formica of The National Pork Producers Council said, “To make the physical changes because it’s going to require either tearing down farms or building brand new farms, with all the supply chain disruptions, we keep seeing figures in the $15-17 million range for a family farmer so if you’re a family farmer already struggling with everything else going on in the economy now if you want to continue in the business, you have to go to your banker and ask for a $15-17 million loan to build a barn. It’s going to drive family farmers out of business and lead to eventually far more consolidation and integration.”

Despite their obsession with the plant-based diet, somehow California accounts for over 50% of pork sales in the US. And if producers in Iowa and other states can no longer sell there, that will make it near impossible to get there and drive up the prices of pork in all 50 states.

Other Global Factors at Play

India has recently approved the importation of pork from the U.S. Pork sales are going to skyrocket because India is a huge market of almost 1.3 billion people. Will that offset the price increase due to the drop in demand from California?

Just like nearly every other industry in the world, livestock producers are running into major challenges due to supply chain issues stemming from the Covid pandemic. The price of beef and all livestock produce is going up because the price of feed has gone up. The price of feed has gone up because the price of growing the feed has gone up. And the price of growing the feed has gone up because the price of gas, fertilizers, chemicals and seed has gone up.

When President Trump was in office, he was trying to level the playing field throughout the world, putting tariffs on other countries, especially China. In the short term, it was painful, which made it hard for people to understand and accept, but long term, it could have provided more stability for the whole market.

Now with President Biden in office, where will the administration place its priorities? How will changes in climate policy affect farmers and ranchers? Will the focus be on growing exports to India, China? Will changes be made with typical trading partners Mexico, Canada, and the EU? Will the trade agreements be workable long term or will they be short term solutions? I personally know several ranchers who started selling beef directly to consumers due to the pressures on the supply chain issues during the past 2 years. Will that continue? Will the recently passed livestock market transparency bill relieve some of the pressure on the livestock producers?

No One Knows–So, Be Ready For Anything

Regardless of who’s in office, there are a thousand geopolitical factors that can affect the livestock industry. The experts don’t know what will happen, farmers don’t know what will happen, and the government certainly doesn’t know what will happen. If the prices tank, what will happen to your business?

You can get puts and calls on your beef prices, but what if the price goes up? You’re going to lose out on all that additional margin. But if you have Livestock Risk Protection, then you’re covered if the price goes down and your extra gains more than cover the policy. It’s the best of both worlds.

No one can predict the future, which is why insurance is so smart. Call us today to talk about your livestock insurance options.