5-6 wt stocker calves

[Stocker Steve]

A few people are jumping on the band wagon here. The thing holding back most of the locals is limited hay supplies and -25 F every week. Almost everything is being trucked south except 3 wts.. I assume they are feeding 5 wts. $3.70 corn down south somewhere, and the 3 wts. are going to be wintered in a building.

 

[bird dog]

"I am still waiting for someone to explain to me what is going to trigger and sustain the ride down. Which of the current things that are driving these prices is going to change enuf to trigger a slump.
There are 3 kinds of people in the world. Those who can do math and those who can't"

What could very well happen. The consumer refuses to pay the price ans switches to another type of meat. I would expect pork to be the beneficiary.

Like Bigfoot I would not eat any steaks if I had to buy them. A good pork butt on the grill and a couple of beers is fine by me.

 

[Stocker Steve]

"I am still waiting for someone to explain to me what is going to trigger and sustain the ride down.

Easy answer - - high prices !

Harder question - - when ?

 

[3waycross]

"I am still waiting for someone to explain to me what is going to trigger and sustain the ride down.

Easy answer - - high prices !

Harder question - - when ?

The thing to remember is that one of the components of this market is supply. In previous bubbles there was the ability to increase supply. That option is becoming increasingly more difficult.
Now that's not to say that a couple of drought free years won't increase the national herd some i, it will. However the available forage in this country is low and more of it gets subdivided and paved every day.

I am not stupid enuf to think that prices wil never go down again but as much as i hate this word the paradigm has shifted, and it continues to shift relative to the forage base in this country.

 

[Stocker Steve]

The thing to remember is that one of the components of this market is supply. In previous bubbles there was the ability to increase supply. That option is becoming increasingly more difficult.
Now that's not to say that a couple of drought free years won't increase the national herd some i, it will. However the available forage in this country is low and more of it gets subdivided and paved every day.

What prevents the US from just importing more from other countries ? COOL ?

I realize the big corn & bean farmers will keep growing corn and beans even if the price drops, because that is all they are set up to do. Specialization can bite. :cowboy:
But in this marginal crop farming area there will be some of that $7 corn ground going back to forage. I for one will be applying using more N and more forage seed this year.
An interesting calculation is how high prices need to go to justify irrigating pasture.

 

[3waycross]

The thing to remember is that one of the components of this market is supply. In previous bubbles there was the ability to increase supply. That option is becoming increasingly more difficult.
Now that's not to say that a couple of drought free years won't increase the national herd some i, it will. However the available forage in this country is low and more of it gets subdivided and paved every day.

What prevents the US from just importing more from other countries ? COOL ?

I realize the big corn & bean farmers will keep growing corn and beans even if the price drops, because that is all they are set up to do. Specialization can bite. :cowboy:
But in this marginal crop farming area there will be some of that $7 corn ground going back to forage. I for one will be applying using more N and more forage seed this year.
An interesting calculation is how high prices need to go to justify irrigating pasture.

Nothing except this country WANTS grain finished beef. Not to say that we couldn't see a market where McDonalds serves Argentenian beef and Ruth Crist serves Iowa beef. But excluding imports the domestic herd is at rock bottom. I saw high yielding butcher cows bring $1.10 yesterday........insane

 

[cross_7]

I don't want to start talking out of my ass and start making things up, but I guess that exactly what I'm doing

In my little part of the world the people that rely on lake water for irrigation haven't be able to do that in 3 years and we're starting on the 4th.
A lot have irrigation wells have played out and some now just have enough water to get a crop up, but play out about midsummer when they're are needed most
The farmer's have collected insurance for 3 years in a row(yield average is way down)
With the cost of just putting in a crop and the cost of the tractors and equip and so on they are looking for a way to make a living

Now with cattle prices like they are I see lots of farm ground going into cattle.

 

[Stocker Steve]

The farmer's have collected insurance for 3 years in a row(yield average is way down)
Now with cattle prices like they are I see lots of farm ground going into cattle.

The crop revenue insurance game can work for a while. Can they switch crops to keep playing?

With the soil we have - - lime/fertilizer/fuel/seed can run up to $500 per acre pretty easy. Water and fence are extra. So you don't want to be renovating pastures very often. Then another $500 to $1400 per acre to stock it. Where do these guys get the money to $$$ to dive into cattle ?

 

[cross_7]

The farmer's have collected insurance for 3 years in a row(yield average is way down)
Now with cattle prices like they are I see lots of farm ground going into cattle.

The crop revenue insurance game can work for a while.
With the soil we have - - lime/fertilizer/fuel/seed can run up to $500 per acre pretty easy. Water and fence are extra.
Then another $500 to $1400 per acre to stock it....

Where do these guys get the money to $$$ to dive in ?

I guess the same place they get the money to farm
Most everybody that farms has cows, it wouldn't take much to go all cattle
Lots of cotton ground that was zero'd out went into milo and have cattle on it now. Lots sowed to wheat and have steers on it now.
Some will graze out, some will pull cattle and bale it and some will harvest the wheat.
We'll just have to see if it goes back in to cotton in a few months.
It doesn't take much more than a tractor, disc plow, grain drill and electric fence and your in the cattle instead of cotton around here

 

[Stocker Steve]

If your in the biz it does not take quite so much. I can buy some additional high tensile wire and 1 1/4" PVC cheap enough, but more cattle are still big $$$ unless you can wait on the natural increase.

Guys that retained heifers in recent years should be smiling now. :cowboy: I thought I kept too many - - but the ones retained last year have increased about $1,000 each in value.

 

[TexasBred]

But I ain't the sharpest pencil in the box either

Edit
I guess as TB would say, volume son think volume !

Absolutely. You and I buying a half dozen and trying to make them work won't make any money but the operator who can put a couple of thousand together and run a tight operation might make $40 a head. $40 is beer money on a few head but on a few thousand it's a pretty good lick.

 

[cross_7]

But I ain't the sharpest pencil in the box either

Edit
I guess as TB would say, volume son think volume !

Absolutely. You and I buying a half dozen and trying to make them work won't make any money but the operator who can put a couple of thousand together and run a tight operation might make $40 a head. $40 is beer money on a few head but on a few thousand it's a pretty good lick.

A guy I know that has more money than Warren Buffet told me told me a while back "I don't mess with yearlings I leave that to the big boys",
He could buy the "big boys" but I understood what he meant.

Everything I ever done was small in comparison, but they busted me one time
I won't take big risk today, even if the money was loaned I wouldn't risk a million dollars on a chance to make 40000.00
If I can see a 100-150 I might go one pot but that'd be all I could handle

But lots of folks do and make it work, look at Pete Bonds
I know a guy in Tulia Tx that has several thousand turned out on the gain and lives well
I have buddy that's president of a bank in Archer county that loans lots of money on steers.
He wants 25% or better invested to loan on steers and won't loan unless he knows you and what you can do.
He says he seen it bust a lot folks and other make a good living

I don't know if it's mental capacity, knowledge and ability or risk tolerance that make it work
Some can and some can't

 

[js1234]

Pete Bonds is a good operator.
I also know a couple guys around Tulia that run quite a few yearlings.
Been several years since you couldn't manage better than $40/head average (some deals lose money but speaking of an average for an operation) pretty handy with stockers. No doubt about it though, it takes a fair amount of cash or credit or both to play. Not every year is a $150-$200 year like the last couple but if one has a good understanding of both cattle and risk management, stockers aren't as risky as many think. The other key is volume and the ability to stay in the game. Sometimes there are sets of cattle that lose money. I'm also of the opinion that double seasons allow you either 2 shots at profit if things are good or more chances to realize a profit on cattle if things are tough. Assuming one is looking at ROI whether they're self financed or not rather than ROE, a ten-year average annual return of 8-10% is certainly doable.

 

[Stocker Steve]

Assuming one is looking at ROI whether they're self financed or not rather than ROE, a ten-year average annual return of 8-10% is certainly doable.

What would the ROE be on leveraged stockers on leased land ?

 

[cross_7]

I think that's it ROI opposed to trying to make a living
An investor can afford the loss and live to fight another day.
The other guy depends on it to make a living and can't adsorb a loss

 

[js1234]

Assuming one is looking at ROI whether they're self financed or not rather than ROE, a ten-year average annual return of 8-10% is certainly doable.

What would the ROE be on leveraged stockers on leased land ?

The ROE would be the return on just the margin put up. So if 25% is your cash and the balance is financed the ROE on a 10% ROI would be 40%. We're of the opinion that one would be on the hook for the full amount so the return should be figured on the full amount whether you're self financed or working on a certain % of borrowed funds. While I'm pretty bullish on the stocker segment as a profitable business longterm, I've never been comfortable with these guys that use ROE figures on highly leveraged operations to reflect 30/40/50% returns that I find misleading. This is a good business and has the potential for one to make a very good living and in some cases, a lot of money. I don't see the need to "overlook" debt obligations when figuring profit to make it seem better than it is. But, to each his own.

 

[cross_7]

That clears some things up on the 30-40% roe that Bonds keeps talking about
I knew I couldn't get that type of return on roi

 

[Stocker Steve]

While I'm pretty bullish on the stocker segment as a profitable business long term, I've never been comfortable with these guys that use ROE figures on highly leveraged operations to reflect 30/40/50% returns that I find misleading. This is a good business and has the potential for one to make a very good living and in some cases, a lot of money. I don't see the need to "overlook" debt obligations when figuring profit to make it seem better than it is. /quote]

Do you "protect" your cattle with LRP?

 

[js1234]

While I'm pretty bullish on the stocker segment as a profitable business long term, I've never been comfortable with these guys that use ROE figures on highly leveraged operations to reflect 30/40/50% returns that I find misleading. This is a good business and has the potential for one to make a very good living and in some cases, a lot of money. I don't see the need to "overlook" debt obligations when figuring profit to make it seem better than it is. /quote]

Do you "protect" your cattle with LRP?

No we don't use the government LRP program specifically. We do actively use the board on our own through our broker as a big part of our risk management plan.

 

[cross_7]

What form of hedge/risk management do you use to minimize risk on stocker cattle