Hay and grain?

[cowman]

I have always had a real hard time getting my head around this dollar thing? We deal in Canadian dollars not US dollars...so supposedly if our dollar is worth so much more than previously we should see American imports costing a lot less in Canadian dollars....I don't really see that happening?
I also wonder why everything is related to the American dollar? A good portion of everything we buy comes from Asia, especially China, so how does our currency stack up there? I suspect the so called strength of our Canadian dollar has more to do with the meltdown in the US economy and the high world prices for oil, rather than confidence in our great government in Ottawa?
You know farmers son, we are just little guys and we can't really do anything to change the world financial markets? If the world markets say the Canadian dollar is worth X amount of dollars, what can we do? If the bank of Canada says the interest rate is going to be 20%, what can we do?
Right now it is cheaper to buy feed than grow it? Might not be in the near future...but this year? You really can't grow barley for $1.85/bu and you can't grow hay for $20! I am sure someone will say "oh Yes you can" and that is fine, they are welcome to it and I will buy it from these super efficient producers!
Unless you are doing a large acreage of hay, the high cost of equipment does not justify putting up hay? In my opinion.
Time is money? Or at least that is how I have always looked at it? If I can make one hundred dollars an hour doing one thing and zero dollars an hour doing something else, how smart is it to waste my hour for nothing?...Or even worse PAY to work that hour! I believe everyone of us should realize how much we are being paid for every hour we put into every endeavor?
Being self sufficient in feed is fine if it makes sense? If you can make more money buying feed then that too makes sense?
Never forget growing your own feed comes with a lot of costs, that should be considered in their entirety? Labor, lost opportunities, weather related problems?
I am sure there are people who are very successful growing their own feed. I am sure their are others who are very successful buying feed...some years you win some years you lose...on both systems! The important thing here is whatever works for you...is the thing to do...for you! One size doesn't fit all.
Personally I am committed to being a low cost producer, without sacrificing too much production. For me that translates into as much profit as I can possibly squeeze out of each cow, without killing myself! It is a tricky balancing act that requires a lot of flexability!
I appreciate your ideas...they make me think. I appreciate the ideas of cswilson,grassfarmer etc. they represent a different way...and they make me think? Everybody in this world has something to teach you...everyday of your life? The value is not that you are going to do everything you might learn from people...but to consider the ideas they are putting forth?

[cswilson]

I think what I was trying to get across is to focus your energies on things in your operation you can control-like input costs etc. Unfortunately international monetary policy is beyond my realm of influence so I don't worry about fluctuations in the dollar as much as I do the cost of my most major expense.

[farmers_son]

I agree.

However we are forced to respond to market forces beyond our farm gate. While we do have direct influence over the expense side we also have to make decisions regarding herd size, amount of debt we can carry, need for off farm jobs, more or less machinery, even land rent and land purchases or sales.

Those decisions are often critical and strategic and directly impact the survival or success of the operation while feed decisions are largely routine. Up to now the right decision was more, more, more cows. At least up to 2002 the more cows you had the more money you made.

At some point we need to be aware that the change in the value of the dollar represents a dramatic and fundamental change in our industry that will negatively impact our competitiveness (defined as profitability). Every decision we make in the next few years must be made in context of the impact the dollar is going to have on all aspects of our operation.

By being aware of oncoming change we can be better prepared for it and make adjustments to our operation before adjustments are forced on us.

[cswilson]

At what point did you presume that because we were discussing hay costs that we weren't aware of the other things that impact profitability. If you are totally certain which way the dollar is headed maybe you should be a currency trader.here's a simple formula for profitability-Income has to be greater than expenses-works for 20 percent interest-90 cent Canadian dollar-drought-flood-how each of us applies his knowledge to make the formula work is what makes ranching the great business it is.

[farmers_son]

And if I was sure which way the price of hay was headed I could be a hay buyer.

Checking back I see the discussion mentioned hay, barley, straw, silage, drylotting, machinery, maintenance, depreciation, interest, swath grazing, twine, delivery, even Belgians. I threw in the dollar.

So was I wrong to mention the dollar? Even though there is not a line on my expense statement for exchange rates it is the number one item affecting my operations bottom line in this economic environment.
Our farm’s profitability has more to do with overall industry profitability than our individual management.

Darn good thing I never mentioned the price of fuel…LOL

[cswilson]

I think deep down you posted to show us old fellers how much smarter you were-if you read your post I'll think you'll see what I mean. You don't have to bother doing that farmer's son we all know you got the bases covered. Your point is taken on the exchange rate-but like I said I'll worry bout things I can control-maybe a team of Belgians is mundane to you but if I replace 300 hours of tractor rent by using them that's 10,000 plus into my coffers-if I shave a dime a day off feed costs on 500 head that's another 10,000-maybe pennies to you but dollars to me. I'm curious what is your strategy to overcome the exchange rate armageddon.

[farmers_son]

I mentioned exchange rates because I was interested in what people thought. There has not been much discussion of exchange rates.

Belgians are not mundane at all and may offer a way to cash flow your way through what I see is a big problem in the next few years. Much smarter than a shiny new tractor and loader. You are right to focus on things you can control. I would say you can control how the stronger dollar impacts your operation. As for the dollar I hope I am wrong but better safe than sorry.

$10,000 is dollars to me too. I am concerned the stronger dollar has the potential to impact my operation to the tune of $100,000. Your operation is bigger than mine.

[cowman]

Farmers son: Obviously you have a good grasp on this money thing. Personally I just don't get it although I have often pondered the whole situation. I guess I just have a mental block or something when it comes to this whole currency thing.
I do feel that sometimes the currency thing is just used to rip the people off? By the exchange today we should be worth a lot more than last year...and yet our money doesn't buy anymore things...probably less!
I do appreciate your bringing out your insights on the currency thing, even though I still don't get it completely!

[cattleman2]

I am slightly confused about the dollar affecting us as well, and I am an individual that is working in the finance industry, to support the cows...

We pay in CDN dollars for our inputs, we recieve CDN dollars for our output, how does the exchange rate factor in to the equation at all???

One might have said in the past that the US created a floor price for our feeder and fat cattle, so with a stronger CDN dollar (weaker US dollar) the floor price will be lower everything else remaining equal.

This doesn't preclude the canadian producers or the US producers from paying more (or less) to buy the calves, but I don't believe that it will really affect each and every farm in the magnitude of 33% as I believe was stated above.

Please explain if I have it wrong?

[farmers_son]

What was stated above was a reduction in gross revenues of 33%. Everyone that sells calves or cows would experience this kind of decrease in revenue assuming a constant U.S. market.

The comparison was between the dollars low January 2002 at .625 and an assumed dollar in the near future of .93 cents resulting in a 33% decrease in our revenues. If the dollar continues to climb at the same rate as in the recent past it will reach 93 cents within a year. Does this explain it for you?

The dollar closed at 85.63 today, almost a full cent above Friday and the highest since November 1980.