Feeder prices and diversity.

[auctionboy]

With such high prices and profits, hopefully how many people are expanding there cattle operation? From everything I have heard about the "cattle cycle" there should be about two more years of good slaughter and feeder prices? I don't believe that and see prices staying good as long as the super markets sell steak for $ 9.00 a pound and lean ground beef for $3.99. So if it isn't to personal how are people diversifing? Stocks, hogs, bonds. If it is to personel don't reply just to stay so and say " That is like asking how many cows a guy has". Thank you.

 

[tom4018]

Read an article this week predicting them falling this spring. Buyers say they are losing money now on the feed cattle. Guess we will have to wait and see.

 

[Crowderfarms]

We're in it for the long haul.Whatever the markets do. We're presently expanding, and clearing ground for more Pasture. Cattle business is not one you do a hit and run on, you have to whether the good times and the bad times, and be able to stick with your plans. IMHO.

 

[Aero]

With such high prices and profits, hopefully how many people are expanding there cattle operation? From everything I have heard about the "cattle cycle" there should be about two more years of good slaughter and feeder prices? I don't believe that and see prices staying good as long as the super markets sell steak for $ 9.00 a pound and lean ground beef for $3.99. So if it isn't to personal how are people diversifing? Stocks, hogs, bonds. If it is to personel don't reply just to stay so and say " That is like asking how many cows a guy has". Thank you.

one lesson to learn is that the retail price has very little to do with what the producer gets paid. 5 or 6 years ago, we opened the American border to Canadian lumber and sawmills that had been very profitable in the past went to making barely enough to continue oeration while others that were not doing as well had to sell out or just close. when this happened, do youthink Home Depot or Lowes lowered their prices? not a penny.

i expect the same thing to happen with cattle and the only way to survive is to increase production (aka have larger numbers to sell) at a much reduced profit. 200 hd @ $175 profit = 500 hd @ $70 profit. sounds ridiculous, but its what we had to do to stay in business and taught me a good lesson.

bottom line: retail prices have little impact on producer profit, no matter what economists say.

 

[backhoeboogie]

Auctionboy, I take it you don't already have your investments diversified? Do that first. Put your eggs in several baskets.

 

[auctionboy]

As for retail prices that stay high and don't come down this will keep prices from dipping to far. There is to much competion for any one in the chain to get to much profit. I meen if someones making any money now a days there are to many people undercutting them. I don't think prices will fall to much because there are to many people looking to take advantage. There competion will keep prices from dropping .50. The only thing besides bse that could drop prices is to many total cattle, but with all the processing plants that have closed I doubt there is to much production. This is just what I think.

 

[Caustic Burno]

It is the same cycle over and over the guys that have been doing this for years will continue. Most of your Urban Ranchetters will fold just don't want to pump the money in as it is cutting down on play time money, a few will hang on with a couple goats a horse and a cow to hold to their ag exemption. The guy that is the part timer will be feeling his belly button rubbing a blister on his backbone. He doesn't have the volume in calves to sell lower to generate cash flow, he usually doesn't have enough land to lease for hunting he has to get super lean and mean. Its hard to stay in business with cows that bring 400 bucks at the salebarn and it cost 370(National Average) to maintain them. Diversification takes capital as well so you are now for sure in the outhouse and when you fall through you can bet you wont land in honey.
So if you diversify you have done your go's into's real well to make sure there is a stable market for your product.

 

[auctionboy]

Be diversify I ment instead of more cows, investing in stock market. I don't believe this cycle will last forever as the world changes. So when prices fall that low whois making the money if super markets keep prices as they are? feedlot, meatpacker, or the actual supermarket?

 

[lakading]

With such high prices and profits, hopefully how many people are expanding there cattle operation? From everything I have heard about the "cattle cycle" there should be about two more years of good slaughter and feeder prices? I don't believe that and see prices staying good as long as the super markets sell steak for $ 9.00 a pound and lean ground beef for $3.99. So if it isn't to personal how are people diversifing? Stocks, hogs, bonds. If it is to personel don't reply just to stay so and say " That is like asking how many cows a guy has". Thank you.

one lesson to learn is that the retail price has very little to do with what the producer gets paid. 5 or 6 years ago, we opened the American border to Canadian lumber and sawmills that had been very profitable in the past went to making barely enough to continue oeration while others that were not doing as well had to sell out or just close. when this happened, do youthink Home Depot or Lowes lowered their prices? not a penny.

i expect the same thing to happen with cattle and the only way to survive is to increase production (aka have larger numbers to sell) at a much reduced profit. 200 hd @ $175 profit = 500 hd @ $70 profit. sounds ridiculous, but its what we had to do to stay in business and taught me a good lesson.

bottom line: retail prices have little impact on producer profit, no matter what economists say.

You just have to be cautious. If a bunch of people expand as you say, prices could really dive. Expanding to 500 head won't look so good if your profit turns into a loss.

Try as you may, you cannot change the laws of economics. The supply, demand curve will always correct itself. As long as you are positioned to withstand the corrections, you should be in good shape.

 

[Howdyjabo]

IMO--Shits gonna have to hit the fan soon.....
The middleman is only gonna supplement the industry for so long.
Already seeing people passing on buying-- just to keep pens full. Which they did all last year.
The ideal would be the retail price going up-- but that never happens- GO USDA.

 

[Caustic Burno]

Be diversify I ment instead of more cows, investing in stock market. I don't believe this cycle will last forever as the world changes. So when prices fall that low whois making the money if super markets keep prices as they are? feedlot, meatpacker, or the actual supermarket?

I know what you meant you still have to have money to diverisfy. If you get a 10% return on investment you had to have 100,000 to invest to make the 10,000. If you think the cattle business is rough the stock they run on wall street will eat you alive if you don't know what your doing. Big gainers in that pasture are big loosers also. I spend more time watching that stock than the cattle as you can loose everthing in one day, ask anyone that had a lot of Enron.

 

[auctionboy]

Prices going up at the supermarket is not the answer. The only inflation I want is in feeder prices. The feedlots have to buy the cattle to keep there $10,000,000 investment open. They make there money marketing there grain anyway like someone else said.

 

[auctionboy]

Caustic don't be afraid of that stockmarket, you wrestle hogs. All i'm saying is diversity. If you put everything into Enron you got what was coming to you.

 

[Caustic Burno]

Caustic don't be afraid of that stockmarket, you wrestle hogs. All i'm saying is diversity. If you put everything into Enron you got what was coming to you.

Son I run a lot of stock on Wall Street aint skeerd , the key is don't invest what you can't stand to loose. The point I am trying to make is you have to have capital to invest. Takes money to make money if you aint got it to invest kinda puts you SOL. I know a lot of ranchers that are worth a fortune in land,cattle and equipment. Capital is another thing all together.

 

[Beef11]

It is a pretty good idea to diversify, I have rode the stock market with fairly good success. I'm in the rental business I would like to team up Aquaculture with cattle and farming. I will likely get into hogs on a fairly small scale. I just started into breeding dogs as well. It seems that alot of Ag folks diversify into brand new trucks when times are good and complain about the payment when things are sour. Ideally you can set up an operation that shrinks and grows inversely with the price cycle. It takes alot of operating capitol to do that though. Direct marketing also helps when prices go awry. Think outside the box. Do things differently.

 

[lakading]

Caustic don't be afraid of that stockmarket, you wrestle hogs. All i'm saying is diversity. If you put everything into Enron you got what was coming to you.

... , the key is don't invest what you can't stand to loose.

Exactly!

 

[auctionboy]

My question was IF you are making money in cows now if you were expanding your farm, or investing elsewhere.

 

[lakading]

My question was IF you are making money in cows now if you were expanding your farm, or investing elsewhere.

If someone isn't making money with cows now, I'd hate to see what happens at the bottom of the cycle.

 

[auctionboy]

Beef11 has the right idea, i'm not saying everyone should tinker in everything. If your afraid of the water don't go aquaculture. If you can't afford to lose money in the stockmarket don't buy stocks, there are many options. On the other hand there is something said for doing something very well, so diversifing isn't for everyone, but if you have cash you have earned and it's in your sock drawer there are other ways.

 

[Beef11]

Now here is a question. If you don't invest what you can't afford to lose how can you invest in agriculture and hope to make a living. If you buy cattle to earn you a living it seems that you really can't afford to lose at least big time and when people go belly up in the cattle business it seems that they couldn't afford to lose that deal. Maybe "afford to lose" is relative. I figure i can lose everything and start over. I just don't want to do that very bad.

What do you mean by afford to lose?