Buyers vs. Sellers Market?

[Angus In Texas]

I have seen a few posts on here lately that have advised against buying cows for the next couple of years...... I am assuming people think the cattle market is going to drop therefore making cattle considerably cheaper in the near future. Seeing as how high cattle prices have been for such a long period of time even with higher fuel costs and higher feed costs, do any of you think that it is just a paradigm shift and that this could be the new market for cattle long term, kinda like gas is now almost $3.00 a gallon and doesn't look like it will ever fall bellow $2.00 again?

 

[hgfarmer]

Well, Ive heard that the market will stay high until 2010-2012, then the market will fall. Just what ive heard though......

 

[backhoeboogie]

Its going to be a while for us in the south. We went through two terrible years with people culling or selling completely out. Eared cattle are out of sight at the local sale barns. This year there is a huge surplus of hay. No one is culling unless it is a problem animal. Pesonally I need 100 plus head and I am small potatoes. There are many folks looking.

 

[Bullbuyer]

You have to think about this on a global scale. In all market places (whether it's oil, beef, gold, etc.), the price is set by supply and demand. Think about this - what would cause a drastic drop in demand for beef or what would cause a dramatic surge in the supply? The demand side is probably the more likely to happen - mad cow, e.coli, etc. We've already seen a little of this. As for the supply side increase - you have to look at global population changes - i.e. people moving in to more rural areas and coverting farmland to housing and in developing nations -the converting of forest to pasture.
A lot of variables to consider !

 

[Brandonm2]

Backhoe is right. In a normal cattle cycle we would have already seen massive herd expansion and be on a downhill slide in market prices. This time it is all different. Droughts have hampered many cattleman's expansion plans. Ranches are getting pushed out at a very real rate by development, acreage going into corn, recreation, and conservation. Many ranchers who WOULD normally expand can't find affordable acreage in their area. The market has been unable to produce the 10-20% national herd increase we saw in past cattle cycles and unless something changes....I don't know where we find the grass for massive expansion.

 

[Angus In Texas]

So Brandonm2,

If operations haven't been able to expand to meed demand why are people advising against purchasing cattle right now to meet demand. Obviously you have to look at the global market for beef but also a localized market as well. But from what I have seen so far the e.coli, and mad cow haven't had as drastic reduction in demand as many had thought would occur. And if ranch land is being replaced by corn, residential, and so forth then the available supply should decrease and if demand stays fairly constant then I would think that those who can expand should right?

As long as they don't overpay for the cattle they are expanding with. The only other option for expansion is to buy from an area where ranches are scaling back due to drought and ship them in or raise your own replacements.

 

[KenB]

Some other things to consider.
The cost of raising cattle has went up, way up.
Price of fuel, fertilizer, seed, feed, hay, fencing, etc.
Plus the price of feeder calves is lower.

 

[Brandonm2]

So Brandonm2,

If operations haven't been able to expand to meed demand why are people advising against purchasing cattle right now to meet demand. Obviously you have to look at the global market for beef but also a localized market as well. But from what I have seen so far the e.coli, and mad cow haven't had as drastic reduction in demand as many had thought would occur. And if ranch land is being replaced by corn, residential, and so forth then the available supply should decrease and if demand stays fairly constant then I would think that those who can expand should right?

As long as they don't overpay for the cattle they are expanding with. The only other option for expansion is to buy from an area where ranches are scaling back due to drought and ship them in or raise your own replacements.

I don't know. You would have to ask them. Some maybe because they remember past cattle cycles and wrongly assume this one will be the same and others may see the cost of expansion as prohibitive. I know here the runup in real estate prices has been unbelievable over the last 8 years. Depending on how you do the calcaulations, I have 1 A.U. animal unit (moderate framted mama cow and calf) of land at over $4000 in Alabama. IF you clear $200 a cow, it would take 20 years to pay off the land and another 5-6 years to pay off the cow.

 

[backhoeboogie]

You have to think about this on a global scale.

For market steers and heifers, I agree. For cattle that will strive in the south, global doesn't work

 

[rgv]

Looking at recent prices for feeders/cows. I think cows are not overpriced vs feeder market comapred to past years.
Any other opinions?

RGV

 

[KMacGinley]

One factor that is always overlooked for one reason or another is the fact that demand is rising here as the population rises here. Since 1980, we have added 50,000,000 people to this country. That is a lot of added beef demand. We haven't added cow numbers to match in any way shape or form. We have increased performance somewhat in the cattle we are producing. Without the room or wherewithal to expand, due to development and the modern aversion to hard work, I would say the traditional cattle cycle is history. Unless foreigners are allowed to dump beef here without restriction. That is what we have to guard against.

 

[MikeC]

One factor that is always overlooked for one reason or another is the fact that demand is rising here as the population rises here. Since 1980, we have added 50,000,000 people to this country. That is a lot of added beef demand. We haven't added cow numbers to match in any way shape or form. We have increased performance somewhat in the cattle we are producing. Without the room or wherewithal to expand, due to development and the modern aversion to hard work, I would say the traditional cattle cycle is history. Unless foreigners are allowed to dump beef here without restriction. That is what we have to guard against.

Nafta, Cafta and all them other Afta's are doing away with any need for more US production.

They's dumping it here now!

 

[Brandonm2]

One factor that is always overlooked for one reason or another is the fact that demand is rising here as the population rises here. Since 1980, we have added 50,000,000 people to this country. That is a lot of added beef demand. We haven't added cow numbers to match in any way shape or form. We have increased performance somewhat in the cattle we are producing. Without the room or wherewithal to expand, due to development and the modern aversion to hard work, I would say the traditional cattle cycle is history. Unless foreigners are allowed to dump beef here without restriction. That is what we have to guard against.

Nafta, Cafta and all them other Afta's are doing away with any need for more US production.

They's dumping it here now!

Brazil is the 500 lb gorilla not YET in the room, when it comes in to play.....watch out. The case for keeping fresh Brazilian beef out is very very weak now. Opening THAT boarder is almost inevitable. Their largest packer just bought Swift. Swift's supply chain COULD be a very powerful tool to have if and when USgov approves Brazilian beef imports.

 

[andybob]

Its going to be a while for us in the south. We went through two terrible years with people culling or selling completely out. Eared cattle are out of sight at the local sale barns. This year there is a huge surplus of hay. No one is culling unless it is a problem animal. Pesonally I need 100 plus head and I am small potatoes. There are many folks looking.

Hay was going at $60 per bale before the local feed store ran out! Someone needs to bring hay up to NC, then take loads of breeding cows/heifers back, most of what is available here are baldies but there are enough Santa Gertrudis types for those wanting 'ear' I still have a couple of Brangus crosses to help make up a load. 18 month heifers were going at $400, yearlings at $360, older cows weaned but not yet bred went at $300, (eared cattle) at last weeks sales.

 

[ArrowHBrand]

Personally I think we are on a downhill slide for cattle prices, but where they stop I don't know. We got 15-20 cents less this year than last but it is still about 25 cents higher than a few years ago. IMO one of the main reasons that cattle prices are still pretty decent, even with high feed costs, is the blizzards that socked the western plains late this winter killing thousands of cattle. Normally the prices for cattle and corn are inversely proportionate: one goes up the other goes down. We haven't really seen a drastic decline in cattle since corn sky rocketed. There are a lot of good posts on here concerning the outlandish price of ag available land and I agree. Investors are artificially inflating the cost for tillable acres putting the pinch on small farmers and keeping young people from getting into farming. What's the cattleman to do if he can't buy or lease land for expansion of his herd? My wife and I have penciled out different types of expansion many times and we haven't been able to figure how to make it pay for itself because land values are so high. Around here tillable acres go from $3,000 and up. The highest I've heard sell was for $8,500/acre. If you buy a 100 acre tract your already a million dollars in the hole. The price of feed has really driven our culling going into winter. Animals that we would have normally fed all winter and sold for a better price in the spring we are selling now to save on feed costs. What really sucks, when goes finally drops, and it will drop, the rest of the inputs will stay the same, i.e. equipment costs, fertilizer, etc. How does that work out?

 

[dun]

Given my history, if I'm buying it's a sellers market, if I'm selling it's a buyers market.

 

[MoGal]

I think they are already exporting too much meat into this country. The packers are global now and own other countries. They can shut down the USA meat export by just "accidentally" puttting bones into the export and voila they can send it from Brazil or Argentina to places who used to get USA beef. Why beef producers here in teh USA aren't catching onto to the fact is beyond me.

Cow prices are already going down. 8 yrs and older bred in 2nd and 3rd stage is already down to 400 to 550 and this was end of last month. They will be 300 by Dec.

 

[Limomike]

Cattle prices are going to fluctuate just like everything else. Supply and demand dictates. But beef is food... more people = more food to feed them.

 

[Brandonm2]

I think they are already exporting too much meat into this country. The packers are global now and own other countries. They can shut down the USA meat export by just "accidentally" puttting bones into the export and voila they can send it from Brazil or Argentina to places who used to get USA beef. Why beef producers here in teh USA aren't catching onto to the fact is beyond me.

Cow prices are already going down. 8 yrs and older bred in 2nd and 3rd stage is already down to 400 to 550 and this was end of last month. They will be 300 by Dec.

Exactly, CULL price is where we most feel beef imports the most. Given the volume of burger sold in this country, cull price SHOULD be 70-80 cents but the packers import an awful lot of foreign lean product.