Get READY for a "BIG TRAIN WRECK"??

[Brandonm22]

Yep, the weather in Iowa got much better right when it needed to and then we hit this world wide credit crisis. IF you got cash, you ought to be able to buy the grain at a reasonable price (a heck of a lot cheaper than it was in June) and fat cattle are still bringing well so you can still pay a good price for the feeder calves. The only thing is you probably are going to have to pay cash since credit lines are drying up all over the country and if you invested your profits into stocks....NOW might not be a good time to sell those. Feeding cattle could be becoming a CASH game. I don't even pretend to guess what this is going to do to cattle prices from here out.

 

[ollie?]

I was thinking if you can buy cattle now would be the time.

Everyone always wants to buy on the bottom but not many really spend any money till it seems profitable which is always the top. Now might be as good of a time as any.

 

[milkmaid]

So in this crazy economy where cattle prices are dropping on a daily basis and people are losing money... Will it be better for a rancher to have cash or cows/hay/etc?

 

[ollie?]

So in this crazy economy where cattle prices are dropping on a daily basis and people are losing money... Will it be better for a rancher to have cash or cows/hay/etc?

I guess that depends on your goals Milkmaid. If we continue in a deflationary economy, money will be king. If inflation fires back up, commodities would seem the logical choice. One must also consider the time frame you are comparing cash to cattle. Over the next month it seems pretty evident that cash is going to be handy. Over the next few years however I prefer livestock. I started buying a few stockers last week. Who really knows what's going to happen...... One thing I do know though milk maid, life is too short to go through it scared. Lay your ears back and do what ever YOU think is right and make it work with hard work and honesty. You'll lose some and win some but enjoy both outcomes. That's life.

 

[dun]

life is too short to go through it scared. Lay your ears back and do what ever YOU think is right and make it work with hard work and honesty. You'll lose some and win some but enjoy both outcomes. That's life.

Excellent!

 

[CattleHand]

Corn and Soybean prices are dropping which means grain should drop also right? I was thinking if you can buy cattle now would be the time. When grain prices drop with the corn and soybean prices then cattle prices would go back up

What part of the world are you from that you don't consider corn and soybeans to be grain?

Maybe I said that wrong but i meant if soybean and corn prices are droppin then feed/grain for cattle should drop also. With that drop more people can afford to keep cattle and feed them or buy a few more and feed. That would make the cattle market jump up again before it drops for the winter. Maybe I'm wrong and dont mind people pointing that out but to me thats what sounds right.

 

[dun]

Corn and Soybean prices are dropping which means grain should drop also right? I was thinking if you can buy cattle now would be the time. When grain prices drop with the corn and soybean prices then cattle prices would go back up

What part of the world are you from that you don't consider corn and soybeans to be grain?

Maybe I said that wrong but i meant if soybean and corn prices are droppin then feed/grain for cattle should drop also. With that drop more people can afford to keep cattle and feed them or buy a few more and feed. That would make the cattle market jump up again before it drops for the winter. Maybe I'm wrong and dont mind people pointing that out but to me thats what sounds right.

On a smaller scale where the individual can pay cash that would work, but many of the major feeders work on credit to purchase feeds. Depending on their trackrecord, the necessary funds may be hard to come by.

 

[aplusmnt]

On a smaller scale where the individual can pay cash that would work, but many of the major feeders work on credit to purchase feeds. Depending on their trackrecord, the necessary funds may be hard to come by.

Hopefully a lot of people will learn to keep some cash reserves and not operate with credit on those variable expenses. There is a lot of good to come out of this if we all learn from it!

 

[dun]

On a smaller scale where the individual can pay cash that would work, but many of the major feeders work on credit to purchase feeds. Depending on their trackrecord, the necessary funds may be hard to come by.

Hopefully a lot of people will learn to keep some cash reserves and not operate with credit on those variable expenses. There is a lot of good to come out of this if we all learn from it!

There aren;t a lot of people that have a half a million or so laying around in petty cash.

 

[somn]

Credit lines are not a problem to get at this time as long as you have a good marketing plan.

 

[Jim62]

So credit is totally going away? Nobody can get a loan for anything?

Do you know of anyone who has not been able to get a loan?

 

[SRBeef]

So credit is totally going away? Nobody can get a loan for anything?

Do you know of anyone who has not been able to get a loan?

Listening to the local WI radio station in the morning, there are several local banks and credit unions actively looking to make loans. They were not sucked into this Wall St mess. Making loans is how local banks have traditionally made their money and stayed in business.

What will change for many of the larger banks is that they will have to go back to operating like the smaller banks and only make loans after "due diligence" = knowing the loan customer and his business well enough to have a pretty good idea that he has the means (=cash flow), collateral and history to pay the loan back. This was something lost on many of the larger operators in their drive for quick profits regardless of risks - which we and our children and probably their children will now be paying for for many years. These big banks really did not care if the loan was paid back - they made all their money on the initial transaction then shuffle it off to someone else, who then bought "insurance" from folks like AIG and other "investment" banks (CDS = credit default swaps) all of which went south like the house of cards it is and you and I are having to pick up the tab resulting from lack of oversight by regulators who should not let this type of thing go on. No FDIC bank could get away with this. So now we clean up their manure and suddenly they want to be FDIC banks!!!

Make a quick loan to about anyone, regardless of whether it made financial sense or not, then "package" the loan with other often bad ones and sell it as a mortgage based "security" was the path to big bonuses on Wall St. This is what will change, it needs to. Good loan customers will be able to get loans.

Folks that are good loan customers can get a loan. It will be more expensive however even for good customers due to the inflation this mess will inevitably cause.

 

[Herefords.US]

Deflation??? Inflation??? Listening to the so-called "economic experts" leaves me confused. It appears that they disagree which way we are heading.

I'm inclined to believe that we are heading for significant inflation - eventually. If that is the case, then hard assets like land and cattle should be better than having cash in the bank.

George

 

[KenB]

I think we will have a small amount of deflation, just with the things that were priced unrealistic high like housing an such.
Then we will be into a major amount of inflation. The inflation will hit after the economy improves enough for people to have enough money to buy with.

 

[aplusmnt]

On a smaller scale where the individual can pay cash that would work, but many of the major feeders work on credit to purchase feeds. Depending on their trackrecord, the necessary funds may be hard to come by.

Hopefully a lot of people will learn to keep some cash reserves and not operate with credit on those variable expenses. There is a lot of good to come out of this if we all learn from it!

There aren;t a lot of people that have a half a million or so laying around in petty cash.

Guess I do not understand how big bussiness operates. I borrowed money 22 years ago to start my small bussiness. I kept a surplus of cash to pay expenses and never relied on credit for any operating cost after the initial loan. I have borrowed for large purchases but not operating expenses. I have not had 7 figure expense but I have had 6 figure ones yearly.

If businesses have to borrow to pay pay roll etc......they are a no away from failure, rather it is millions or thousands!

 

[somn]

If i had the $4 plus million it takes to fill the yard and buy the feed in petty cash I would not need to feed cattle or own any trucks. It sure would be nice if that was my problem.

 

[Brandonm22]

Deflation??? Inflation??? Listening to the so-called "economic experts" leaves me confused. It appears that they disagree which way we are heading.

I'm inclined to believe that we are heading for significant inflation - eventually. If that is the case, then hard assets like land and cattle should be better than having cash in the bank.

George

We MAY go into a period of inflation IF (and only if) the Fed begins printing all these trillions that they have promised out. IF NOT and the fed tries to borrow (sell T-bills) to the tune of $3 trillion plus.....deflation will be the order of the day. $4 trillion+++ of wealth in stock value and the paper value of corporate bonds has been wiped out in the last month. If the fed takes another $3 trillion worth of capital out of circulation it will be hard for the banks to find capital to lend (even with the fed pumping capital into the banks). If nobody can get credit, nobody will have the money to buy your land and your cattle. When you sell (if you sell) it will be for less $$$$. As everybody depreciates assets people who have been borrowing will be unable to borrow because their existing notes will be underwater (ie the mortgage is more than the ranch/feedlot/house is worth). They can't borrow....they can't make money...they lay off employees.....they have no money....they can't pay their bills.....their landlords, doctors, grocers, etc have no money....then you got Depression city. My Grandfather used to talk about how cheap he COULDA bought 1000 acre farms for in the Depression. Of course then NOBODY had the cash to buy anything so everything was CHEAP. I don't know what is about to happen. You might be right and we just print the paper to buy Uncle Sam and the banks out of the hole.......and we could be 2-3 years away from $350 an acre grassland again. A lot depends on which devil the world's central banks want to dance with.......deflation or currency devaluation.

 

[aplusmnt]

If i had the $4 plus million it takes to fill the yard and buy the feed in petty cash I would not need to feed cattle or own any trucks. It sure would be nice if that was my problem.

It would not be petty cash.

I have no idea how a feed lot works but I do know how all businesses SHOULD work. A business should be paying down the original debt from profits until one day you are operating with cash not always borrowing operating cost and spending profits. If a business has to borrow to pay pay roll then they are just a bump in the road away from being a Fannie and Freddie!

 

[somn]

If a business has to borrow to pay pay roll then they are just a bump in the road away from being a Fannie and Freddie!

I wished cattle feeding was as simple as janitor. Several years ago I borrowed money to make payroll. It had nothing to do with me being a bump in the road away from Fannie and Freddie it had to do with a packer I sold hundreds of head of cattle to going thru a buyout by another company. Thru a simple banking error all the checks they sent out during the merger or aqusition or whatever it was came from an account with no money in it. Until they could figure out what they or whoever else was at fault had done wrong nobody has any money. Now imagine if you could what it is like to know your cattle are dead and a company you have done business with for years has been bought out by someone with apparently no money. I borrowed to make payroll. The bump in the road was somebody elses but it still affected me. I can only assume you have never sat on a overdue account large enough to effect your bottom line. Some business do.

 

[HerefordSire]

We MAY go into a period of inflation IF (and only if) the Fed begins printing all these trillions that they have promised out. IF NOT and the fed tries to borrow (sell T-bills) to the tune of $3 trillion plus.....deflation will be the order of the day. $4 trillion+++ of wealth in stock value and the paper value of corporate bonds has been wiped out in the last month. If the fed takes another $3 trillion worth of capital out of circulation it will be hard for the banks to find capital to lend (even with the fed pumping capital into the banks). If nobody can get credit, nobody will have the money to buy your land and your cattle. When you sell (if you sell) it will be for less $$$$. As everybody depreciates assets people who have been borrowing will be unable to borrow because their existing notes will be underwater (ie the mortgage is more than the ranch/feedlot/house is worth). They can't borrow....they can't make money...they lay off employees.....they have no money....they can't pay their bills.....their landlords, doctors, grocers, etc have no money....then you got Depression city. My Grandfather used to talk about how cheap he COULDA bought 1000 acre farms for in the Depression. Of course then NOBODY had the cash to buy anything so everything was CHEAP. I don't know what is about to happen. You might be right and we just print the paper to buy Uncle Sam and the banks out of the hole.......and we could be 2-3 years away from $350 an acre grassland again. A lot depends on which devil the world's central banks want to dance with.......deflation or currency devaluation.

Hyper-Inflation! There is no way around it now. Fertilizer will be $1 per pound. $1 will buy what .50 will buy today. Time frame? Not sure but guessing 2.5 years