How' the fall run doing?

[cowman]

Have been really out of the loop this year and haven't been near an auction mart at all this fall. Just wondering how the market is doing?
Grain is going up like crazy, so I expect calves are on their way down in a big way?
How does everybody see it? Should you bail early or feed them over? We had pretty well decided we wouldn't sell any calves this year...and seeing how I usually do the wrong thing...was wondering how others see it?

[15444]

With the exception of a couple of potential trouble-making heifers, we kept all of our calves back, even in the midst of the worst drought to hit our area in 70 years. Instead, cleaned out some of the poorer yearling bred heifers and culled hard on the cows. Last time I looked, futures did not look to rosy for next spring, so I don't know if we made the best decision. Two heifer calves we did sell, were 290 and 340lbs at $1.19 and $1.06 respectively. Not great, but the 1.19 one was a very light calf off an old cow and the 1.06 one had a broken jaw that had healed.

[grassfarmer]

The fall run was slow to start around here which surprised me given lots of guys were out of grass early due to a dry spell in June/July. Prices certainly seem to have fallen quite a bit in the last couple of weeks with bigger numbers. One think I note is the huge discrepency between steers and heifers - are the heifers under pressure due to the difficulty of getting them into the States?
I wonder too if the feedlots are happy not to bid too hard on calves and let producers background more of them on cheap higher forage rations due to higher grain prices but also the difficulty of finding labour in the feedlots? It seems to me many of the guys that are selling out their cowherds around here were the "dump and go" merchants, the guys that weaned into the auction and never looked at prices or economics for the other 364 days a year. I personally think producers adding value to their calves by weaning, backgrounding and selling at opportune moments could do substantially better than the average producer this winter - but don't they tend to most years?
We sold a trailer load of off colours and other singles through Innisfail Presort last week. They did OK as their ring weights were 10lbs over their on farm weight a week earlier. $1.06 average on 592lbs, all heifers. Sure beats taking a $50-$100 discount for selling singles through the regular ring - and what is the average shrink on weaned calves in a regular sale ...60lbs ??

[grassfarmer]

calf run is on, lower every week it is about time ,hard to make them work at barley price en $20/hour labour .
about time, labour gets a fair return and so is the grain man .
we are taking more calves again at mutch lower dollars next couple of weeks to bring the average down .
this way every body makes a little money .

[kpb]

I agree with 15444 regarding the futures in the cattle market although I havent checked for a couple of days. grassfarmer, after doing the weaning, backgrounding, grassing thing for 15 years I'm not convinced that this is the best way to go. There's a lot of hidden expenses (mechanical, fuel, weaning loss, uncertain markets, interest on your money tied up, etc. etc) that people don't think about. I'll likely do it again this year but I think the profits on backgrounding this year will be scant, not because the feed is expensive, it's not, but because the prices won't hold to spring.

kpb











kpb

[grassfarmer]

kpb, I'm surprised at your thoughts on this. I was only talking about weaning and backgrounding to sell probably Feb/March not grassing. Given the last sale report I saw with 5 weight heifers $1-$1.10 and 7 8 weight at heifers .97-$1.04 surely there is potential? With plenty of cheap forage around surely there is money to be made. Do you reckon the feeder price will be lower in Feb/March than it is at this moment with the auctions full of calves and all their weaning troubles?

[kpb]

grassfarmer, i know that you can sometimes make money backgrounding and i know that you can sometimes lose money. i know cuz ive done both. It often seems logical to do and the calves can look cheap relative to 8 weights but things dont always work that way.

I think that feeders may still be around where they are right now in feb but i doubt the 8's will be where they are right now because the fats are likely to come down. So altho it looks good now dont forget that the price on the 8's now may not be where they are in feb.

grassfarmer, it is a bit of mug's game trying to outguess the market. All I really know is that even in the good backgrounding years, your return per dollars invested is not that great after all the expenses are taken out--that's in the good years. On any sort of risk-reward analysis based on money invested and time involved it's hard to make it work I think because when you're wrong and you've got a lot of calves in the lot things can pretty ugly really fast. Whether you keep your own calves or buy others that's still a lot of money tied up in something that a small change in cents per pound can lever up to a big loss.


kpb

[kato]

Around here the buyers are getting really picky. Discounts for off-types are pretty big. If the quality is there, they say the price is OK, but you've got to be careful what you take to sell. I guess we'll find out on Tuesday. We've got a few consigned to a presort.

We're buying calves to background, but they're pretty small. They were coming in pretty slow at first, but last week was busy, so we figured they must be off a bit. This week not one calf has showed up, so I'm not sure what that means. Either there aren't any at the sales, or someone is out there with some money!

[cowman]

I wonder how low calf prices will affect some producers decisions to stay in this business? Just offhand I can't remember how low calves went in 2003 but it looks like we could be there in the next few weeks?
In 2002, when grain prices rose dramatically and calf prices fell, the Americans stepped in and bought a lot of calves? Don't know if that will happen now as the Canadian dollar is very high and corn is high?
Where does this end up? Cheap calves should decrease the supply eventually? Less feeders available will reduce the need for grain? This grain price is being driven(supposedly) by crop reductions in other parts of the world?
What happens next year if there is ample grain around the world, but we don't have as large a calf crop? Will we see record calf prices?
The Canadian cow/calf producer has taken a beating for the last three years(maybe four)...how much longer will he be able to survive? Or want to?
I would suggest calves at $1.06 really is getting borderline to any kind of profit? How many industries in the real world can afford to take prices we were getting in the 1980's?

[kpb]

cowman, I wish farmers son was around so we could debate the existence of a cattle cycle again. I still think that we are just at the start of the downward trend of the cycle. Last spring I said that I thought that calf prices would be lower this fall and would continue to get lower over the next three to four years.

I think you will see steer prices at .80 to .85 before this cycle is over (as we saw in the mid-90's) and I think prices next fall will be lower than those available now. I think the cattle cycle is alive and kicking and those who ignore it will get kicked.

kpb

[smcgrath76]

My personal belief is that the cattle cycle is alive and well (although slightly messed up by BSE).
Combine the cycle with the high $ and it does not look so good. Generally speaking it takes longer for input costs to drop as the dollar rises, versus the speed with which calf prices decline.
I also believe that over the long haul, our low dollar killed us in terms of being leading edge and competitive with our facilities, etc.
Our low $ relative to the US, led to high prices, which compensated for the declining infrastructure amongst our processing industry. Now that the dollar is higher, we really need leading edge efficiency in processing.
The discussion on who owns the processing is another topic altogether.

[grassfarmer]

Cowman, you say "I would suggest calves at $1.06 really is getting borderline to any kind of profit?" - really? and do you know my production costs? - do you know your own for that matter?
Personally I'm quite happy selling my off sort heifers at over $600 straight off their mothers. Their mothers cost $100 of purchased feed to overwinter last year and that was by far my biggest cost. That said these would be my lowest margin cattle, the main group that get sold after preconditioning and backgrounding will be my next lowest margin leaving my grassfed steers direct marketed as my highest margin cattle by a long way.
They are averaging $1390 a head after paying processing fees and beef delivery charges. Sold a year after weaning they work back to $1000 per calf at weaning even if you allow a $ a day feed cost for their second year.

There are so many opportunities in this country if people would just see them. You say "How many industries in the real world can afford to take prices we were getting in the 1980's?" - I would say how many of the coffee shop pontificators are bitching but haven't reviewed their production or marketing policies since the 1980s?

[cswilson]

GrassFarmer u crazy old coot don't you know were all gong to hell in a hand basket-I'm glad I can't charge rope at the Co-op or I might just take the plunge lol. Cows do great on grass and water not so well on whine and ponder. We made a bit of money on our fat cattle this summer and I suppose we'll make a bit on the next set.

[Cattleman]

kpb and smcgrath, I am on the other side of the cattle cycle arguement. For argument sake, do you believe the North American cattle industry operates on the same cycle? My understand from teh cattle cycle theorists is does? Then if so, isn't the American herd in rebuilding phase? Or is it done already? Also, it sounds like Canada is in the liquidation phase??
Maybe I have some of this wrong, but it appears to me that once something happens in the industry that resembles part of the cycle, we jump to say the cylce is working, such as a shift in calf prices.
In the theory of the cattle cycle production drives prices, and we react to these prices in our production decisions, but right now, grain is driving cattle prices, and this along with drought is driving production decisions. None of which relate to the cattle cycle theory.
To me it seems that trade uncertainty, weather uncertainty, price uncertainty, and demographics of agricultural producers is driving production decisions.
I would like to hear your thoughts, I think there are a couple holes to punch through! Thanks.

[kpb]

cattleman, all of the variables that you mentioned along with others such as currency movements will affect the short-term cattle prices. But the cattle cycle being 10 to 12 years long can be used to help predict the longer term movement of prices.

Also, it does not matter what the Canadian cattle herd is doing, expanding, shrinking or staying the same. Prices for fats are set in the U.S.,like it or not and the size of our herd has no bearing on prices. It may be hard to swallow but our prices are established by the U.S. market--there really is no such thing as a North American price--there is a U.S. price that is reflected, with the basis, in Canada.

I am always amazed at people who think that all commodities, including cattle, are not cyclical. This is not really mysterious-when prices are high commodity producers (cow-calf guys) expand their production to take advantage of the high prices. This, in turn, leads to more product, more supply to meet a limited demand and, therefore, prices decline. This forces producers to cut back, hence less production to meet demand, therefore higher prices. Therefore a cycle.

At the moment U.S. cattle producers are expanding to realize higher prices. This will result in more calves coming to market, hence more product and lower prices in the future as I stated in my previous post. It matters not at all what Canadian producers are doing in terms of liquidating or expanding their herds. Except that if you expand when the U.S. guys are expanding, you are going to be stuck with more calves when the prices slide.

The old saying is that no heifer calf kept to be bred when prices are high has been a profitable cow. Mainly because that heifer's calves are hitting the down side of the market. The best time to buy or keep heifers for breeding is when they are selling for .70 a pound and nobody wants them. Then that heifer's calves will hit the rising market.


kpb