25 Jan Garrett Lister: Cattle Trading, Hedging, and Basis
Garrett Lister didn’t grow up in the traditional agricultural family lifestyle but his father was a high school ag teacher and, through that, Garrett found himself involved in 4-H and FFA. Attending college at Kansas State University, he figured he would start his degree in the world of Agricultural Economics, assuming that he would transfer to another direction when he discovered that passion.
How to Choose a Master’s Program
As Garrett found himself deeper into the economics courses, he found that he continuously had more questions he wanted to ask and more answers that he needed to find; he opted to stay in the major. With his sights set on an early graduation in his Junior year, he decided to run for KSU’s All-Student Body president. The campaign fell short and, with his degree completion looming ahead, he was unsure of the direction he wanted to take.
That burning desire to ask pressing questions in livestock markets led Garrett to get his master’s degree. His thesis focused on cattle marketing and an internship with Integrated Livestock Services opened a broader knowledge base in the market as he focused on the concepts that go into price determination of feeder cattle, the procurement of feeder cattle, and the project discovery within the industry.
“Ultimately it was an interest level in economics and in what I was studying at the time – wanting to dig a little deeper and get into not just what happens in economics, but the how and why,” says Garrett.
Risk Management in Cattle
What is hedging?
Garret finds himself rotating between two different roles in his current position of cattle risk management for Innovative Livestock Services. One one end, he works at the hedge desk. Hedging based on risk and Garrett’s job is to deal with, primarily, price-risk. In hedging, you try to put yourself in a position that protects you from a negative market drop. If the market goes up, you don’t make as much but, if it goes down, you don’t lose as much.
By placing hedges, they are able to focus on the important aspects of raising cattle such as care of cattle, good herd health, cattle growth, and the production of a great product that packers will pay a premium for.
“We are there to take some of those swings in prices out of the equation, and let the producers focus on doing production to the best of their ability because it will directly drive their bottom line,” says Garrett.
When Garrett is working at the hedge desk, he is running the bid sheet and having conversation with buyers to execute strategy of what they are thinking in regards to the cattle and averages. Plugging in numbers, he is able to get values to make the snap decisions on if the cattle are worth the risk.
In the weeks that he isn’t working at the hedge desk, Garrett’s job revolves around research and a lot of it! Going into varying degrees of depth into the data that they generate raising and feeding cattle at Innovative Livestock Services, Garrett builds the research that is utilized at the hedge desk. Understanding what they have seen in the past and what they know will stay the same and what will change in the future, they can calculate predicted averages for their conversations with their buyers.
Importance of Risk Management
“Ultimately, a very good reason to manage risk that you know about ahead of time is that there is a lot of risk that you don’t know about, and, when they reveal themselves, you want to be able to give them your full attention,” says Garrett.
Being hedged and having that price risk taken care and a disciplined strategy for their business has allowed Innovative Livestock Services in 2020 to focus on the turbulent times that the COVID-19 pandemic has inflicted on the cattle markets. Through their structure, they were able to quickly think about the supply chain, market cattle, and focus on changes into the production inputs for cattle. It also required cost-analysis on the risk of leaving pens empty or purchasing cattle to fill those pens.
Post college, Garrett read a book called Grit by Angela Duckworth and found truth in her words about fostering passion. Garrett believes that passion is not something that can always be found through self-reflection or introspectively, but is something that you can discover through curiosity. Asking questions and realizing what topics or interests spark more questions is a great way to discover your passion. Be curious and you’ll find a passion to follow.
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