80 cent calves?

[cowman]

Kpb: Grudgingly I think you might be right! It isn't fair...but that is reality!
I have come to think you have a pretty realistic view of the situation and a pretty good idea of how this thing works.
I will hope you are wrong.
I do think BFW has a good grasp of the situation this year? It is pretty sad situation when a poor call is based on another wreck for the grain industry?

[15444]

kpb, thankfully you came back to posting. I really enjoy reading your thoughts on the markets. You always seem to have such a solid grasp on all facets of it. I totally agree with your points. I don't see the market crashing this fall, but rather a steady progression downwards over the next few years. Regardless, I am still a little uneasy for the coming fall. The question is whether there will be a 20-30 cent drop in feeder prices this fall, or if that will be delayed for another year. So many factors that could influence calf and cow prices this year. Keep posting.

[cswilson]

I know if calves hit 80 cents I'll be buying-when everybodies crying you should be buying-the cattle market just about always trips up in a year ending in 6.

[mb_rancher]

Kato,

Would this place be located near hamiota?

[Horse]

I would like to wade in on this $1/ day grass when you take most cows are 1600# and calves are 300 plus by grass time I dont think you could feed them for under a $1/day.
I have a neibour that would like to rent some land and we sat down and tryed to come up with a price and we kind of agreed that if I didnt charge him anytging he would probably at best break even, thats growing greenfeed at todays price whitch is low but mabey the quality may be poor so that part probably averages out.
Then we tryed to figure out the breaking up or some old hay and pasture and that works out be an expensive exercise by the time it gets back into grass, so I think the best solution is like this Aboriginal told me he said that when christ left this world he told them DONT DO NOTHING UNTIL I GET BACK.

[cowman]

I also wonder kpb if the "classic cattle cycle" in the USA could be the start of our cattle industry going south?
The American rancher has had a couple of good years, while we were in a wreck? As I've said before I don't know where all these cows are going, but they are definitely leaving my area? And you can just bet they won't be coming back!
As Farmers son says: The Americans get $200 more per animal than we do, so doesn't it make sense to raise cattle there? Despite the border costs we are sending a lot of feeder cattle south every week?
I know there are ups and downs in the cattle cycle and you ride out the tough times and enjoy the good times, but it seems to me our "good times" were basically stolen away by the BSE thing?
I suspect a lot of people lost a lot of equity in the last couple of years? Can they afford to lose some more? Do they have understanding bankers?

[farmers_son]

Kpb: You asked “I would ask anyone who disagrees with this scenario or thinks its unlikely---farmers_son?--to show me where they think we are in the cattle cycle. Or why they think feeders will rise from here.

I frankly do not believe in a cattle cycle. The cattle cycle if it ever existed does not exist in today’s non functioning markets. The notion that the prices we receive for our live cattle somehow relate to supply and demand unfortunately ignores the realities of captive supplies which in this country are said to exceed 60%, lack of competition between our two major packers, import quotas which are regulated by government who can turn on or turn off the import tap at will not mention that we now are dependent upon markets beyond our border for exports and as such we would expect influences to come to bear from cattle inventories in other countries if you insist on believing that supply and demand affect the prices we are paid for our live cattle. So for me the question of where we are at in the cattle cycle is like saying where is the man in the moon. The answer of course is there isn’t one.

I certainly did not say that the price of feeders would rise from here. The challenge for producers like me is to accept that we just do not know and do not have any control over what prices will be this fall or three years from now. Any attempt trying to predict prices ignores the reality that our markets are non functioning and have absolutely nothing to do with supply and demand thus there is no way of predicting what prices will be.

However we have difficulty living with reality and economics force us to gaze into our crystal ball because we have bills to pay and payments to make. The forces I see guiding prices are not supply and demand rather:

When the major monopoly packers build new capacity or buy capacity like Better Beef they lower the live prices for about a year until the plant is paid for.

The packers will only lower prices to a point where they do not get attention from the federal government.

The real variable in feeder prices is cost of gain more so than the fat price.

Imports or the possibility imports of U.S. feeders will limit our domestic prices.

Feedlots be penciling in larger profits for themselves when buying calves which would be negative for weaned prices.

Cattle inventory numbers do not rise or fall because of weaned calf prices but because of major droughts and availability of feed and pasture.

The overall economy drives the demand for retail beef. However those market signals do not make it down to the producer level and certainly do not make it beyond the packer level.

High energy prices may be inflationary.

[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.

[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