Changes in the cattle business

[ASRG]

A lot of cattle producers have got pretty good at cutting costs to the bone and squeezing every penny out of that old cow that is possible....BSE and the ten years of starvation prices, was a pretty good teacher!
For the first time in close to a decade prices are fairly decent? Will we see an expansion of the cow herd or will producers take the opportunity to grab the money and run?
I ask this because of a recent talk with a neighbor who has decided now is the time to pack it in. He told me although prices looked good, he has a funny feeling about the business.....like when is the other shoe going to drop! Maybe we're all a little leery after seeing what a thing like BSE can do to a market?
Anyway, last fall he sprayed out his hayland and his nephew direct seeded a crop into it this spring. He will be breaking up what pastures he can throughout the summer. He plans to sell one quarter that is too rough to breakup.
He tells me he is looking forward to travelling a bit in the winter and not being tied down feeding and calving....which I can certainly understand!
I suspect there are a lot of guys like him, but I wonder who will take over raising beef? If the cow herd takes a major reduction, through attrition, what will be the implications for the beef infrastructure....the feedlots, auction barns, packing houses, trucking business, etc.? Will they remain viable?

[farmers_son]

For me I have seen my costs go up. While I know what you mean and I have changed my practices as a result of the past decade the fact remains my costs have risen not fallen.

The changes you highlight stem from a paradigm shift in North American agriculture caused by President Bush’s decision to subsidize the ethanol industry to reduce U.S. dependence upon foreign oil. This has overnight made grain production profitable by raising the price of especially corn with other grains following. The entire animal grain feeding industry has been impacted by higher feed costs.

We will see acres previously in forage and pasture switched to grain. I think what we will see is a change in where the cattle are. Acres that can produce grain will grow grain. However those acres that are not suited to grain will see more cattle on them. So there will be herd reductions in some areas but herd expansion in other areas. I am expecting even higher prices for calves this fall which will reward those who keep their cows. The high cost of equipment will slow the switch from grass to grain. Grain is not that hugely profitable if you have to start buying newer or bigger equipment.

We should see numbers showing herd rebuilding after the January 2012 census numbers are released.

[littledoggie]

It will be interesting to see those January 2012 census numbers to determine if the herd is indeed rebuilding, or if the c/c industry was just replacing a bunch of old cows with some high priced replacement type heifers or bred cows from dispersals.

[kato]

That's what's been going on here. Not so much the high priced replacements part, since we bought them as calves for less, but certainly the replaced old cows part.

When cows were worth two or three hundred dollars, we would cut them some slack, simply because even getting a late calf was better than giving the cow away for free. That put our numbers up by close to 30%.

Now, however, with culls bringing proper money, we are not so generous. We've gotten rid of a lot of the old girls, and replaced them with heifers. We're getting down to pre BSE numbers, with no plans to take the herd back up to that size any time soon.

[smcgrath76]

There are a lot of folks who are taking
the money and running. We have spent
the last 10 years expanding rapidly
through retained females and some
purchases, with holdups due to drought
along the way. Our costs are much lower
on a per cow basis than they were 10 or
even 5 years ago. We plan to spend the
next 5 years maintaining our current
cowherd size and continuing to work on
both costs and value to increase our
margins. We are looking at another
possible expansion starting in 5-6
years, as we feel with the price of cows
today, it is not the time to expand
anymore.

[ALLFARMER]

I am planning to add 75 to 100 cows this winter, but it's going to have to rain here soon we are getting dry. So depending how much feed we can putup this summer. Also good bred cows better be reasonably priced 1250 to 1300 or so thats would be top dollar for me.

[burnt]

With many calves pushing one thousand bucks over the winter, you expect to buy "good bred cows" for cows for "1250 to 1300 or so"!

This is what's wrong in the industry - one guy tries to make his profit on the loss of another . . .?

If you want cheap stock, why don't you try to raise cheap stock yourself? Damn that makes me angry.

[grassfarmer]

Why would you be mad at Allfarmer for stating he wants to buy at that price? Who decides if that is "cheap" or causing the seller a loss? I guess you'll be really mad at me getting the pick of a very good herd in the fall of 09 for $600 - $625. I call it good business - and that's what we are in - business. We need more businessmen in the cattle industry not guys that think it's all fun and games if everything is at record high prices and quitting when prices are down.

[littledoggie]

What's really wrong in this industry is that too many guys are trying to make a buck off of what we produce. Since we can't set the price, and can't pass on increased costs, we have to find ways to make ends meet. smcgrath - I guess the economy of scales is what is working for you? A bigger herd is fine if you have the manpower or have youth on your side. Governments tend to believe that "bigger is better", but personally I don't believe it. I guess if you have 1,000 head and 3 guys working then the cows are getting looked after well enough. How many cows can one guy look after effectively?

[burnt]

Well grassfarmer, all I've got to say is that the packers love bottom feeders who don't care about integrity or human dignity - only thing that counts is the bottom line.

I guess it would be ludicrous to try to maintain your margin at the retail end - just keep on stepping on the head of your supplier.

If your direct-to-consumer sales are as successful as you proclaim them to be, why is is necessary for you to try to buy your goods below the cost of production? Something is rotten in the state of Denmark. Or is it Scotland.

One cannot indefinitely disguise greed as good business.

[per]

Come on Burnt Out Dam Spot. If a willing buyer and seller reach a price, that is the price. All he said was he wouldn't pay any more. He knows if no one has any for sale at that price he won't get any. I don't know about the rest of you but after bumping along at low margins for quite some time I am not willing to pay large betting that this market will stay strong. Call it greed if you want but the buy high sell low model is not sustainable. As far as the cow herd is concerned, these high cow prices are allowing attrition to take place and conversion back to farmland. Many are still getting their heads knocked off. My observation is that a few are expanding but many are leaving.

[Ruken]

So what if Canada reduced the cow herd by half and became a self supplying nation? The only issue we would then have is competition with chicken and pork. Certainly we could keep the markets open for the off-type parts of the carcass but would not be open to the international wims of the world economy. Personally, I am not willing to pay over $1100 a female considering the fickleness of the marketplace out there. It's not that long ago where I imagined what it would be like for cows to be at $1000. It's a shakey market out there. In 2003 I was naive, today I'm cautious...

[grassfarmer]

Wow, Burnt you really don't understand business do you? Was I stealing the cows at $600 - no, the guy was eager to sell them in a depressed market due to drought and feed shortage. I paid him at least market price and saved him the trucking and auction sale costs. It was the best deal we could do at the time and I took on a substantial risk at the time given that I had to buy feed in the same market. Where is the greed in that? Meanwhile you are wanting the taxpayer of the country to pay you a bail out package over BSE - isn't that a bit greedy to or do you reckon you are entitled?

[15444]

At the depths of BSE, I bought a few bred cows at $350 a piece delivered. Good old (12 years) purebred Hereford cows when culls were going for $200 or less as kills. I didn't make a killing on them, but they paid their way, got my money back and made a little extra.

[farmers_son]

Check out:

Canfax Cycle Indicators and Heifer Retention

http://www.canfax.ca/Samples/Cycle%20Indicators%20%20Heifer%20Retention%20May%2 02011.pdf