US Beef Cattle Herd Liquidation Continues

[ASRG]

Just my opinion:
Live cattle prices have not risen enough to keep up with inflation.
I think probably beef has mostly kept up with inflation? Somebody is making money, although I doubt they are making a fortune!
When you take the "average" canadian consumer they need to consider where they spend their food dollar......not because food is overly expensive....but because everything else is? Fuel, housing, utilities, recreation...all have gone up a lot in the last twenty years!
A clear example is my own case: 19 years ago I built a new house using a general contractor. 1550 sq ft. double attached garage,all the bells and whistles of the day- $71,000. I supplied the land/well/septic system/road....I doubt I had $100K in total?
I sold steer calves that year for $1.27/lb. and those were heavy 750 lb calves...not sure what 600 lbs. were worth.
Today I couldn't build that house for $200 K...and last fall I sold 650 lb steers for $1.28....you do the math.
In 1992 it took 2.7 acres to keep a cow....that was hayland and tame pasture. Basically you could get about $30/acre for rent because barley was only about $1.50/bu and canola $5.50/bu......today if you ask $80/acre there is a stampede at your door!
Barley is still a dog at around $4/bu but canola rocks the world at $13/bu.?
On a four year rotation with decent yields the average gross price of crop production is $550/acre? So at 2.7 acres per cow....she needs to gross $1485 to equal crop!
Recently I was involved in a real case, where a farmer near Three Hills Alberta negotiated a surface lease renewal with an oil company for $585/acre/yr. It went to mediation and through his records he proved that was indeed his production returns!
Is what we are seeing, a real shift in land use ? Will crop prices fluctuate and will inputs fluctuate? Without a doubt....but I doubt cattle prices will rise enough to match the money in crops?
Now I may be completely wrong, but I suspect the cattle business will retract as the economics just aren't there and the demographics are changing? New younger farmers won't work for the poor returns and the younger generation of consumers are moving away from beef (and meat in general). We probably will never see the numbers of the past.

[wd40]

fs - I remember those days as well. But let me add.
We had price discovery on both sides of the gate, and no price or farm support programs.
Today we are price takers on one side of the gate and buy retail on the other side of the gate, and price support prograqms that benefit the corporate structure.
Secondly, the auction marts of the early days sold the "odd and sods" the 3rd cut cattle. The good ranch cattle still sold out of the yard. Now we have a auction mart control system that dictates prices and we love em.
In 2004 a retired Cargil packer CFO told me that the typical board room discussion in Wichita (Cargils HO) was "we've kept the beef industry on it's knees long enough, it's time to give them some air"

[grassfarmer]

I wouldn't agree with your auction marts only selling the odds and sods in the past wd40. It looks to me like that still happens to a large degree - auctions selling all the "weaned in the auction" calves from small time producers and the satellite and internet sales creaming off many of the big loads of preconditioned and direct from ranch sales.
It's a dangerous situation for sellers because if you are not careful the price is still established in the auction for the odds and sods and this price used to pay for the good direct from ranch calves. It's a method to pull down overall calf prices.

[kato]

A stampede for $80.00 rented land? Send 'em here, in our area it's more like $40, or $50 tops, unless you've got potato land.

We sell from the yard, and we also sell at the auction mart, and there's a place for both, IMO.

Oddly enough, our best ones go to the market, because they top it, more often than not. We sell our own calves this way, because we can package them up into identical groups, spread the risk, and sell them all at what we consider an optimum weight. When you watch the market over the year, it's up, it's down, it's all over the place, and we refuse to put a whole year's work on the line dependent on the market on one day out of 365.

Usually we use sales out of the yard for the calves we buy, since there are lots of them, and they're hopefully consistent in size and quality. The prices we get for our own calves at the mart are certainly discussed when we negotiate on the yard sales, too, and have helped us get a better price in the past.

The big worry now, for us, is that if cattle numbers fall enough, we may see the auction marts start to shut down. Just as the loss of local elevators was bad for small grain farmers who couldn't put together a semi load of grain, the loss of local auction marts will be bad for smaller cattle producers.

[Kathy]

Have any prices kept in line with actual inflation? I'm preparing information for a history book and found a few receipts from my Dad's dealership when it opened in 1948... at that time repairs work by a mechanic was billed out at $1.50 per hour... now it's what... anywhere from $85 - 110 per hour... There is a huge disconnect between prices and the actual "cost" of services etc.... this is one of the reasons we don't answer the ag census.. as the information provided is used against us, as the primary producer. Manufacturers don't charge cost plus a percentage.. they charge what the market will bare. Manufacturers move their factories to other countries to reap the benefits of lower salaries etc... eg. of bail out of car dealers like GM when they turn around and set up factories with our tax dollar in China...

[burnt]

This recent column helps put today's prices into perspective with those of 60 years ago -

“Staggering Figures”
Neil held out the invoice for the newly bought calves. “Buck twenty out there,” he stated, “plus the freight. It works out to about a buck thirty”. At 485 pounds weaning weight, the rancher that produced those calves received a grand total of$582 per calf in the fall of 2010. As a cow calf operator, I could only shake my head. Even with their lower overhead, the western cattle producers must have a hard time penciling a profit with those prices.
Here in Ontario, it is disastrously short of breakeven.

When I recently presented a Member of Parliament with the Canadian cattle producer’s request for mediation on the BSE class action currently in progress, the Member pointed out that some calves were again bringing “a buck thirty” per pound. Under my silent stare, he falteringly stated that while the cow-calf operator might not find even that improved price to be overly profitable, the feeder/finisher will have a hard time penciling a profit with the higher priced calf. “There are just not enough dollars in the finished animal”. I pointed out that that was not my fault so why should I work for nothing to subsidize the consumer.

The actual value shortfall was sharply highlighted by a farming account my long-retired uncle recently described to me. His early farming experience gave perspective to today's prices.

Soon after marrying my aunt in 1947, he bought my Grandfather's Zurich area farm including 6 cows, about 20 head of young stock, grain and machinery all included. They milked Durham cows, he said, “because they were dual purpose and milked better than the Herefords”. The main piece of machinery was a “B” Allis Chalmers tractor. The total package cost above ten thousand dollars.

After the move, Grandpa’s love for the place compelled him out to the farm almost daily to check on things. Thus, when Uncle Harold shipped two finished steers to Toronto stockyards in 1951, Grandpa noticed and asked about their absence.

"Shipped them to Toronto", Uncle Harold replied.

"How much did you get for them?" Grandpa asked.

"$900" Uncle Harold told him.

Grandpa was literally staggered by the news and just stumbled in a small circle for a few minutes mumbling to himself "Nine hundred dollars, nine hundred dollars . . ." Uncle was locked in paroxysms of laughter as he relived the moment, "$450 each", he chortled. In about 1950 Uncle Harold paid $7500 for one hundred acres and roughly $3000 for the livestock, feed and machinery. And shortly thereafter sold two finished steers for almost $900? “I just hit a good market” was Uncle Harold’s assessment. He had received more than double the $200 Grandpa was accustomed to receiving for butcher steers just a few years previous.

So, whether one uses the $200 or the $450 figure, and even taking into account our increased productivity, it is staggering to extrapolate those values into today’s economy. And then remember that in the depths of the BSE crisis in 2003, many steers sold for less than $450.

A business that survives only by cannibalizing its production base will necessarily and inevitably fail. So indeed, “a buck thirty” seems a bit skinny and could use some fattening up, all things considered. Staggering figures, indeed.

[kato]

How true. And scary as well.

I wonder if, when the day comes that only the very rich can afford a steak and even hamburger is a luxury, people will sit back and wonder how it happened?

It's not like they haven't been warned, either. When politicians put their (and their friends) interests ahead of the country's, only bad things can happen. Just look at Washington. What a gong show that is! And our country's food security is being frittered away just as surely. We have so called safety nets that totally discourage diversified farms, and favour the large over the small. We also have policies in place that actually promote rural depopulation and the eradication of medium sized farms. There is no commitment to our food security that sees farther than a year down the road. What does it take to make the light come on?

As the saying goes, "You're going to miss me when I'm gone."

[ASRG]

Kato: Just playing devils advocate here....but will anyone miss us? Once upon a time there were a lot of machinery manufacturers in Canada...does anyone miss them?
The cattle business is a "mature" business in North America.....demand isn't going up and it likely never will?
Now you and me might enjoy a steak or roast but the demographics say younger people are moving away from "complicated beef"! In other words hamburger is in....the rest is out. As hamburger climbs in price more soy type fillers will be added to keep it cheap. And if you've never tried a veggie burger, you should....not much difference than Macdonalds, or Burger king!
Cattle still make sense on junk land and if they are basically fed the waste from crop production. There will always be a small niche market for high end beef....but we certainly don't need the numbers we have now to fill that market?
I doubt food prices will go crazy. The poor just can't afford it and the middle class won't put up with it! The government will take care of the people who elect them and that isn't the few farmers left in this country?
The good news is no one forces us to keep producing for nothing!