effects of cattle, corn, interest rate, and land values

[uscangus]

we know the effects of corn per bushel, according the Federal Reserve Bank of Kansas City, to land values. they said that if corn hits $4 per bushels land will depreciate about about 47-49% and when capitilization rises more than 7%. my question how it will affect the value of cattle prices. since the demand of corn drops, will the price of beef prices drop because cheaper feed. hence, greater entries of more cattle in the market with lower overhead of feeds. supply and demand.

i highly appreciates the Boards answers in regard to supply and demands. thank you kindly, uscangus.............

 

[Howdyjabo]

Cheap cattle are over- for at least 3 years- low supplies are going to rule the market.
But that doesn't mean cattlemen are going to be making big money unless corn does go to $4(even $5 would be nice).
Just our luck that cattle supplies got tight(increased profit potential) just as we had increased competition for corn and a potential crop failure at the same time.

I don't see corn prices going down till next fall -- the sky is the limit until grain costs start to bankrupt the end users. And that has already started, when increased exports and real crop reports come in its going to start bankruptcies rolling.
I had chickens going belly up first/ but now it might just be ethanol .
Being a cattle farmer(got out of chickens TG) I would have preferred to see chickens go down first-- if ethanol goes down that puts the cattle industry in more jeopardy to join the bankruptcy whirlpool ahead of chickens and hogs.

Course the government could step in and ruin the crop farmers hay day and curb exports to drop demand.
I am sure they could find a way to get mad at importing countries so they can embargo again
I admit I am getting cynical in my old age

 

[SRBeef]

we know the effects of corn per bushel, according the Federal Reserve Bank of Kansas City, to land values. they said that if corn hits $4 per bushels land will depreciate about about 47-49% and when capitilization rises more than 7%. my question how it will affect the value of cattle prices. since the demand of corn drops, will the price of beef prices drop because cheaper feed. hence, greater entries of more cattle in the market with lower overhead of feeds. supply and demand.

i highly appreciates the Boards answers in regard to supply and demands. thank you kindly, uscangus.............

The statement above by the FRB of KC is interesting but based on economists formulas.

However the current economy is very different than anything ever seen before. With interest rates near zero (=speculators looking for anything to produce a return higher than bank cd/savings rates), huge national debt financing going on (=a low dollar and increasing exports of what appear to be cheap US goods in foreign currencies), increasing prosperity in Asia increasing demand for beef, etc. etc. I doubt the FRB's traditional formulas are very reliable.

Despite what appear to be higher cattle prices, the US herd is not increasing significantly for several reasons.

Speculators are moving the price of corn, cattle and about every other physical commodity in directions with little regard to supply and demand, weather or logic. They just want movement of prices and bet both ways like they are at a casino in an attempt to produce a return higher than the miserable interest rates being paid on savings with little or no interest in ever taking delivery of whatever they are betting on.

Corn is not likely to go back down to $4 and even if it does land prices in many midwest ag areas (the only area I know anything about) are not likely to decrease by "47-49%". They may not keep increasing at the current rate but I highly doubt they will fall back that much. For example if a midwest farmer has 1000 acres of paid-for land purchased at much lower prices and a nearby tract of 160 acres comes up for sale and he has a son or daughter who would like to join the family farm, what is that 160 acres worth to that farmer??? The answer is usually "a lot". And what ever is paid for the land can be spread over the adjacent paid-for acres...

So USC Angus, I would not wait for corn to fall to $4. The US is the corn supplier to the world. And the world needs corn. Ethanol is also generally a good thing for American Agriculture. But that is a different thread topic.

Those that think bad-mouthing ethanol will bring the price of corn down dramatically and drop the cost of feeding cattle by traditional methods are kidding themselves.

Like it or not, corn prices are now tied to the price of oil for several reasons not just ethanol. Corn is a world-wide market and reflects the declining US dollar as much as the ethanol market. And oil is not going to go back down to under $20 a barrel....

If predicting the future was as easy as the formula tends to indicate there would be a lot of rich people. Things do not always go according to the economists formulas, especially in the new economy we are seeing in recent years.

Cattle and other ag businesses will adapt to the new economy. The thing that does appear certain is that things are changing. DDG's are taking the place of corn in many rations as well as adding other feedstuffs. etc.

An interesting topic but not one that is easy to predict. and the answers are definitely different in CA or TX than they are in IA, MN or WI.

jmho.

Jim