Area Report

[Caustic Burno]

Hauled 11 calves to the evil salebarn Saturaday morning, most were 4 to 5 weight's a couple heavier avg 92 cents a pound. Every calf was a baldie in the trailer with the high yeller baldies fetching the most folding money.

 

[Jogeephus]

CB, from what I gather, seems prices have slipped here too. If you look at the sales report it shows some high prices in the range they give but I wonder if this is not done intentionally to get peoples hopes up. Seems the ranges they give are the highs and the lows but the average? I don't think its based on a weighted average which, to me, is somewhat misleading. JMO

I also have a question for you. Assuming we go in a recession, what do you think this will do to cattle prices? Will more people stay home and grill out more thus increasing the demand or will demand decrease? (I know this is just one small element in a complicated pricing system)

 

[Caustic Burno]

During the last recession in the 70's a lot of Cattlemen went under in this area. I can see a trainwreck even worse in one today as the country is much more over extended on credit.

 

[cypressfarms]

During the last recession in the 70's a lot of Cattlemen went under in this area. I can see a trainwreck even worse in one today as the country is much more over extended on credit.

Went under as in the price of cattle dropped below what it costs to produce, or because of a lessened profit margin?

Although cattle as a foodsource will have a base value, it makes one wonder how corn prices (insert stupid ethanol policy here) and other market trends will affect us as a whole.

Caustic, besides the fuel prices, what other similarities from then to now do you see?

 

[Brandonm2]

I am with Caustic on this one. The problem now is that land is valued so high that cattle can not and are not expect to pay the note in many many places. If I had some fancy offfarm job making $150g and up a year, I probably would do the same thing and use that high income it to acquire land and cattle; BUT if you lose that big time job or cattle prices drop to the point that they can't cover the fertilizer and the fuel costs a lot of people will start hurting especially since it has become harder to get credit now. I am not predicting disaster.......YET; but the ranch economy is tied to the general economy much much more strongly than it ever has been before. A lot of ranches have been bought with nonfarm income as tax shelters, hunting clubs, or for portfolio diversification. IF the situation in the general economy worsens dramatically in the coming 24 months, you COULD see some such new property owners dump their rural real estate holdings (as banks, builders, investors, and many homeowners are now dumping their residential holdings). When THAT happens the value of land would drop and eventually even profitable ranches would see their balance sheets (and their credit limits) decrease proportionately. The big hedge though has been that since the value of the dollars is ~60% of what it was 18 months ago, bargain hunting foreign money has entered many U.S. real estate markets (like Manhatten) preventing the freefall that would otherwise have occurred. Even though ranch property is near all time highs as measured in dollars it has dropped substantially if your measuring stick is Euros or Yen and unemployment is still insanely low despite the influx of foreign labor (which has kept labor from following food and fuel prices up). It is really too early to predict how all the cards will fall; but I am far less bullish than I was six or twelve months ago.

 

[Caustic Burno]

I am with Caustic on this one. The problem now is that land is valued so high that cattle can not and are not expect to pay the note in many many places. If I had some fancy offfarm job making $150g and up a year, I probably would do the same thing and use that high income it to acquire land and cattle; BUT if you lose that big time job or cattle prices drop to the point that they can't cover the fertilizer and the fuel costs a lot of people will start hurting especially since it has become harder to get credit now. I am not predicting disaster.......YET; but the ranch economy is tied to the general economy much much more strongly than it ever has been before. A lot of ranches have been bought with nonfarm income as tax shelters, hunting clubs, or for portfolio diversification. IF the situation in the general economy worsens dramatically in the coming 24 months, you COULD see some such new property owners dump their rural real estate holdings (as banks, builders, investors, and many homeowners are now dumping their residential holdings). When THAT happens the value of land would drop and eventually even profitable ranches would see their balance sheets (and their credit limits) decrease proportionately. The big hedge though has been that since the value of the dollars is ~60% of what it was 18 months ago, bargain hunting foreign money has entered many U.S. real estate markets (like Manhatten) preventing the freefall that would otherwise have occurred. Even though ranch property is near all time highs as measured in dollars it has dropped substantially if your measuring stick is Euros or Yen and unemployment is still insanely low despite the influx of foreign labor (which has kept labor from following food and fuel prices up). It is really too early to predict how all the cards will fall; but I am far less bullish than I was six or twelve months ago.

The simularties of the late seventies and today are scary, I guess I should say the late sixties as this was when easy money started for purchasing land. By the early 80's S&L's started failing.During the same time we were getting hit by the Arab oil embargo and runaway fuel prices. Who remembers the Savings and loans? Falling cattle prices. Lots of people were covering cost and expanding on easy credit and then it came time to pay the fiddler. Unemployment went through the roof the only difference in a recession and depression is in a depression you are out of work in a recession your neighbor is.

 

[backhoeboogie]

Seems like they were starting 5 weights at $110 that last sale I went to. That's been a few weeks. Maybe it is time to start buying (if they have something)?

 

[Jogeephus]

I don't want to sound negative but I think we are heading toward a recession. If this is right, and you could give some advice - say three main pieces of advice - What would they be? (I've been building my fort and I just want to see if I got things covered.)

 

[Caustic Burno]

I don't want to sound negative but I think we are heading toward a recession. If this is right, and you could give some advice - say three main pieces of advice - What would they be? (I've been building my fort and I just want to see if I got things covered.)

You can make money in a recession you just have to pay for everything will cold hard cash.
The cows have to pay there way and it can be done it takes a lot on your part.
You can make money on 10 head or 100 it is all about controlling front end cost.
Cull if a cow isn't producing a calf every 12 months send her to the salebarn, cost the same to upkeep one that is producing income every 12 months.
It is still about maximizing grass and minimizing front end cost. There are several ways to do this.
We have no control over the price at the salebarn example I am getting the same price per pound today as in 2002, diesel has tripled, as well as fertilizer since then.
I am going to rotaional grazing this spring to maximize grass .

 

[tom4018]

Was that price for heifers That is about heifers been running here with steers running about $1.10.

Read an article somewhere that was predicting 10 goods years for the grain farmer which would hurt cattle because of the high feed prices. Guess we will find out. Several people here have sold out (cattle) and put their farms in a program that pays about $200 an acre for areas near waterways and sinkholes.

 

[Jogeephus]

CB, I agree with the front end costs. Its easy to pick up the check from the calves and purchase a "want" and forget that you have another several months before you see a check. I've heard a lot of talk about how high cattle prices are. Maybe. But like you pointed out the costs have tripled - I know my land prices have as well. By far, my number one cost is fertilzer. Its gotten ridiculus. I can't help but wonder if backing off the stocking rate and backing off the frequency or amount of fertilizer won't be some of the solution in my situation - along with my rotational grazing. Though I hate to not push my pastures to their fullest, I've learned without rain, no amount of fertilzier will make them produce more forage. I'm not saying I'm going to let the the forage go to weeds but it does seem you can keep a knife sharp with a lot less time invested than keeping one razor sharp - if that makes sense.

 

[Caustic Burno]

CB, I agree with the front end costs. Its easy to pick up the check from the calves and purchase a "want" and forget that you have another several months before you see a check. I've heard a lot of talk about how high cattle prices are. Maybe. But like you pointed out the costs have tripled - I know my land prices have as well. By far, my number one cost is fertilzer. Its gotten ridiculus. I can't help but wonder if backing off the stocking rate and backing off the frequency or amount of fertilizer won't be some of the solution in my situation - along with my rotational grazing. Though I hate to not push my pastures to their fullest, I've learned without rain, no amount of fertilzier will make them produce more forage. I'm not saying I'm going to let the the forage go to weeds but it does seem you can keep a knife sharp with a lot less time invested than keeping one razor sharp - if that makes sense.

You make prefect sense I can't control the price of the fertilizer per ton , but I do have control over the number of tons I purchase. I have cut fuel consumption considerable over the last couple of years, no cuts left there.

Tom to your question that was a mixed load of calves.