80 cent calves?

[cswilson]

Well farmers_son when the cycle spanks you good you'll become a believer. Maybe if you don't believe it exists you won't follow it and you might even make some m oney till then just keep figuring.

[farmers_son]

For certain, you can use whatever fortune teller tricks you want. Lots of people believe in a cattle cycle. Tarot cards might work too. It is all BS anyway and we are free to believe whatever ever BS makes us feel better. Most people struggle with uncertainty and create imaginary ways to believe they have some control over their destiny, of course they do not at least when it comes to live cattle prices in this country. One thing is certain if there was an accurate predictor of future prices that actually worked the person who had that knowledge would quickly own the industry.

Say…Cargill and Tyson already own the industry, how about that. Now how do you think they managed such a thing??? Efficiency, well maybe. Economies of scale, could be. However might be price fixing.

They wouldn’t do that would they? It wouldn’t be fair.

[kpb]

farmers_son, I am pleased to hear that you think that the cyclical nature of the cattle business is similiar to predicting the future based on tarot cards. In fact I think that your viewpoint is just about the same as most cattle producers who would rather feed cows than do a little thinking about the future of cattle prices.

It is people like yourself who create the opportunites for people like myself. The cattle cycle is not like believing in the man in the moon or tarot cards or any other sort of voodoo. It is not a belief at all but rather a historical fact. It is clear from looking at the past that the cattle business, like any other commodity based industry, moves in cycles between peak demand and low demand and between low prodution and peak production. It is not exact but it is pretty predictable based on cattle numbers and the trend towards increased or decreased production. If you would like futher background on this easily plotted trend I would ask you to read the Stockman Grassfarmer where Allan Nation has outlined this trend many times and has also advised how producers should react to it. Any of his books are also useful. Harlan Hughes has also clearly outlined the cycle and where he thinks we are in recent Cattlemans magazines.

As cswilson has stated the cycle tends to last about 10 years. I think this one will trough in 08 but I could be wrong--it could be 07 or 09? But it is clear from trends in the U.S. that we are on the down side of the curve and prices will trend lower. farmers_son, this is not magic--simple economics based on increased calf numbers from an increased cow herd that comes about from ranchers holding back their heifers to breed.

Finally I am surprised to see that you think the cyclical nature of any commodity-based business is some kind of fantasy. All commodity-based industries have a cycle--this is a simple historical feature based on supply and demand. I know you feel that the Canadian market is distorted due to the packers but I would ask you to have a wider view of our market. Our prices are set in the U.S. and our calf prices are determined by the prices there so where they are in the cycle is also where we are

Finally I would again ask you to show me--which so far you have failed to do--where you think we are in terms of future pricing. Or do you feel that it is all out of our hands and all we can do is wonder at the future because any attempt to predict it is worthless? I guess if we're not ready to learn anything from history some of us are going to have to repeat it time after time. But I have made money from the cattle cycle in the past and I intend on doing the same this time around.

kpb

[kpb]

15444, thank you for your generous comments. I am following your thoughts exactly and do feel we are in for a gradual slide this fall and next fall rather than a sharp drop. But I must be getting old because I do, too, worry about this fall--as you said maybe the price drop will be sharper than I thought.

anyways as long as there are lots of guys like farmers_son around who do not believe in the cyclical nature of cattle prices--and there have always been lots and always will be--there will be lots of guys buying breds at $1500 a shot, buying grass cattle at $1.50 a pound and afraid to buy when the calves are cheap. This creates an edge for ranchers who can use some knowledge to their own advantage.

kpb

[cswilson]

It's ok farmers son I just bit the head off a chicken and spread his guts under a full moon at midnight and they told me the cattle cycle is alive and well. How many cows do you run anyway-just curious.

[farmers_son]

Kpb: I have done quite a bit of thinking about the cyclical nature of the cattle business, like yourself. If you wish to believe in a cattle cycle and I, after many years in the cattle business, choose not to who is to know which of us is right or wrong. Sometimes we will guess the market right, but not every time.

Prices will trend lower but more because of the devaluation of the U.S. dollar/increased valuation of Canadian dollar than actual or supposed cow numbers. I do believe everything has a cycle. However I think cattle numbers are affected by weather cycles more than prices for weaned calves and think it would be very interesting to see charts of cattle inventories compared to rainfall or severe droughts.

Yes, the U.S. market and U.S. cattle numbers are an important market fundamental but we cannot just look at that without considering non-NAFTA imports, North American exports, overall health of the economy, competition among packing plants, alternative meat choices, weather, U.S. Farm Bill, bilateral trade agreements like NAFTA and now that beef trade is global cattle how about inventories in important beef exporting countries. No one can ignore the impact grain prices have on feeder prices, I guess to some extent that equates to weather which I mentioned above.

Actually the cattle cycle is not a historical fact at all. I am looking at U.S. cattle inventory numbers and there is no pattern at all after about 1959. Hey, didn’t Tyson go public in 1963. Hmmm… If there ever was a cattle cycle it has not existed for over 40 years. And if you look at beef production numbers rather than cow inventory numbers you would see a steady increase with a relatively unbroken uptrend since 1950.

[farmers_son]

Cswilson: Actually the moon will not be full for another 5 days. I keep track of such things. I know of people who can predict the weather a year ahead by looking at walnut shells and of course there are those who can fortell the weather by examining pig livers. I think we will have better luck fortelling the weather then we will foretelling cattle prices until such time as Tyson and Cargill find a way to fix rainfall too.

By biting the head off a chicken at least you got rid of some competing meat products. Reminds me of a joke I heard about a two fellows watching a coyote turning in circles licking his hind end. Apparently the coyote had just scored a chicken from the nearby Hutterite colony and was trying to get the bad taste out of his mouth. ;--)

[grassfarmer]

Or the other current chicken joke:

A bear, a lion and a chicken are sitting talking about who is the toughest.
The bear says, "when I bellow the whole forest trembles with fear."
The lion says, "when I roar the whole jungle shakes with fear."
The chicken says, "when I sneeze the whole world sh*$s itself."

[grassfarmer]

There is an interesting perspective on the cattle cycle from anh Australian viewpoint at http://www.agrifood.info/review/2002/Griffith.html
They clearly think the US cattle cycle is very real but they don't have their own Australian cattle cycle. Shouldn't every non subsidised country have a cattle cycle based on the same principles that seem to occur in N. America? Why does it only happen on this continent?

[kpb]

well farmers_son, you just keep right on doing what has worked so well for you in the past. If you think there is no cattle cycle and no relation between the number of calves available and the price of those calves that's fine. I think you better examine your historical numbers again because a lot of people who have survived a few complete cycles in this business--along with ag depts and professors (think Harlan Hughes)--think there is a definite relationship between the number of bred animals in the U.S. (hence future calves) and the price of feeders. Where are the authorities to support your position that this is not correct?

One question of cswilson's that you didn't answer is how many cows you're running. I get the feeling that a lot of this talk is pretty academic for you whereas for me it's my only living for my family so I have, you might say, a vested interest in having an idea where future prices are likely going. And like cswilson said on another post, i'm also getting tired of wasting my posts on sundowners who are running 20 cows and think they're in the cattle business.

kpb