Feeder price resistance?

[grassfarmer]

I see TEAM sale today sold less than 2700 out of 4000 entered. I'm questioning the prices some cattle are withdrawn at - examples 900lb heifers at .9775 and 1000lb steers at $1.0925. How much is enough? everyone will have their individual expectations but if I was in the feedlot sector these prices would look fairly expensive I think. If 1250 lb fats are making this 83 cents price that's only $1037 - why would you want to pay close to $1100 to replace it with a 1000lb replacement?

[mb_rancher]

I was wondering the same thing? I think if i was selling animals today I would have sold instead of passing them. These are good margins to be selling feeder cattle on. Margins on fats right now are in the dumps!

[cowman]

Actually grassfarmer it is assuring that these feedlots are confident enough to be paying these prices as obviously they must see the market on fats going up? One thing about feedlot owners is they are risk takers in a big way? Sometimes they win big and sometimes they lose big! Sort of like a high roller in Vegas?
I suspect they see a very cheap feed supply, a domestic packing industry that is fast moving toward a point where they need just about every animal produced here, and a hungry group of American packers? Obviously they have faith that the border problems are going to go away?

[grassfarmer]

Rather than real prospects of making money I suspect the feedlots are just continuing with their age old business of hiding non-farmers money from the tax man. I suggest you re-read Ostercamps "Behind the Veil of Silence" specifically the paragraph entitled "Feedlot profit/loss - twenty year history" - which includes the following fact:
"The following is a profit/loss graph for Western Canada feedlots from 1979 -2002 showing a net loss over that period of $4.85 on a twenty year average."
Clear proof that the whole feedlot sector is based on a fallicy - the idea that we have the climate, cheap feed and ability to fatten cattle cheaply and profitably clearly is not true. This also explains to me why the feedlot sector has been relatively comfortable throughout this "BSE" crisis buying feeder cattle at decent prices. In comparison the UK cattle fatteners dropped their buying in price of cattle by $400 the first week of the 1996 scare to reflect the $400 drop they were receiving for their fats.

[cowman]

Yea grassfarmer, you probably are right. The tax advantage thing is very much a part of feeding cattle. There is a medium sized custom lot fairly near to me and their business is largely based on people playing the tax game. A whole lot of doctors, lawyers, businessmen in the cattle business!
But then we benifit from this too, because no matter how grim the profits look these speculators have to buy or really take a screwing from the taxman.

[PureCountry]

The problem with that vicious cycle is that it can get much worse. A bank manager once told me they'd seen hundreds of people - farmers, ranchers, or not - start out buying $10,000 worth of cattle for tax issues, and a few years later they're buying $100,000 or more. Some were WAY more, just trying to beat the system. The damnable truth of it is though, you have to pay the piper some time; even though income tax is a crime.