Hay versus Cattle Profits

[Running Arrow Bill]

I know I'll get some hate mail from this one...lol...however:

The hay producers, feed & mineral people have a good formula for business:

Cost To Produce Product + PROFIT = Selling Price

Cattle People:

What Traffic Will Bear = Selling Price (usually below cost)

I know the producers of NON-cattle products know they have a lot of expenses to stay in business and have a captive audience for their products. However, how come the cattle people don't have the same leverage and all when it comes to selling one's product? We all know the answers already... ;-)

Anyway hay producers we've been contacting won't even estimate what their 2008 crop will sell for..."...depends on fuel, fertilizer, water, equipment, etc. costs". Seems like they have us by the ying-yang folks!

On the "brighter side" (?) anyone needing generic haygrazer (low protein) hay might take a trip around the country...seems there is a lot of that junk hay available for $20 to $35 a bale (including West Texas).

 

[rdbigfarmboy]

Not just Hay. Theres no possible profits buying hay at what is the present market price $60 per roll or 100 plus per ton. Im not buying hay but I do buy minerals and bag feed occasionally.
Fertilizer is the issue. What is the diving force behind the price increases? Please dont say demand ( i might shoot u). It aint (the old republican answer)demand....
Theres an angry feeling I get when somebody continuously gouges me. Im at that point. Nuf is Nuf. True this is year 2 of a terrible drought in the area, cow numbers are tanked in this area. Additionally the ethanol and biodiesel plants are creating excess of feed stock at low cost. It would seem protein and grain based feeds should be at last years price or lower.
In Tennessee its minerals, all types of feed, and everything related to cattle are about 20% higher than last year. The coop says it demand and they are just passing on cost. Many cattle were sold and several are starving locally. The Griffin dead animal removal folks say they have 140 to pickup this week locally.
Will the gentleman farmer buy enough bird feed, hunting camo, and toys to keep the farm services business open?
{forget all them Im just trying to save mine}

:compute:

 

[dun]

Not just Hay. Theres no possible profits buying hay at what is the present market price $60 per roll or 100 plus per ton. Im not buying hay but I do buy minerals and bag feed occasionally.
Fertilizer is the issue. What is the diving force behind the price increases? Please dont say demand ( i might shoot u). It aint (the old republican answer)demand....
Theres an angry feeling I get when somebody continuously gouges me. Im at that point. Nuf is Nuf. True this is year 2 of a terrible drought in the area, cow numbers are tanked in this area. Additionally the ethanol and biodiesel plants are creating excess of feed stock at low cost. It would seem protein and grain based feeds should be at last years price or lower.
In Tennessee its minerals, all types of feed, and everything related to cattle are about 20% higher than last year. The coop says it demand and they are just passing on cost. Many cattle were sold and several are starving locally. The Griffin dead animal removal folks say they have 140 to pickup this week locally.
Will the gentleman farmer buy enough bird feed, hunting camo, and toys to keep the farm services business open?
{forget all them Im just trying to save mine}

:compute:

Sadly, it is demand. In the current global economy it isn;t just your neighbors or even others in your country, it's china, india, and third world countrys that is creating the demand. If a country manufactures a product like fertilizer and it can be sold for more to india then the US, take a wild guess as to where it's going to go.

 

[rdbigfarmboy]

Thanks
Very true. BUT
The wages in India, Pakistan, South America, and almost everywhere except a few countries (Japan, Western Europe, Canada, Australia) will NOT support that argument. The third world is a cheaper is winning economy.

Its not competition from countries with average wages in the 50 cents to 3 dollars per hour range. Those countries are finding other means to achieve the end. Until the days of Reagan the USA was a big exporter of fertilizer and the equipment to make fertilizer. What changed?

The ability to make fertilizer is very limited both by raw materials and energy.
Columbia and Mt Pleasant TN. were big producers of phosphorous. Not anymore.

However with crude oil because they have a fat market the {American consumer} they (international business with american names) will pay for 100 dollar crude.

 

[Wewild]

Sadly, it is demand. In the current global economy it isn;t just your neighbors or even others in your country, it's china, india, and third world countrys that is creating the demand. If a country manufactures a product like fertilizer and it can be sold for more to india then the US, take a wild guess as to where it's going to go.

Good post. It's just gona get worse for a while yet.

 

[Wewild]

However with crude oil because they have a fat market the {American consumer} they (international business with american names) will pay for 100 dollar crude.

Gas
http://www.eia.doe.gov/emeu/international/gas1.html

Steel
http://www.reuters.com/article/pressRel ... RN20080109

Fertilizer
http://www.marketwatch.com/news/story/f ... 2D728D0%7D

 

[Jogeephus]

How many companies control the manufacturing and distribution of fertilizer? How many companies control the manufacturing and distribution of oil? Years ago it was illegal to have a monopoly and for good reason.

Back to hay. I produce hay but not for commercial sales. Why is it that when I want to sell off some surplus while its still in the field - for bargain prices I might add - so I don't have to move it - I get no takers? But the same SOB who stood me up this summer now wants hay from me now! He is SOL cause I ain't moving it again unless its to a hay ring.

 

[Wewild]

How many companies control the manufacturing and distribution of fertilizer? How many companies control the manufacturing and distribution of oil? Years ago it was illegal to have a monopoly and for good reason.

I don't know. How many are there?

Most folks might think Rockefeller was the name of a great person.

 

[Jogeephus]

How many companies control the manufacturing and distribution of fertilizer? How many companies control the manufacturing and distribution of oil? Years ago it was illegal to have a monopoly and for good reason.

I don't know. How many are there?

Me neither. But I have a friend who is a broker and he says the base elements are controlled by less than three main players. I think he said potash was essentially controlled by one company. I believe he said that ammonium nitrate plants for our area is down to 3 as well and one was hurt by a hurricane and I'm not sure if it ever got running again. It is a shame when I can by ammonium nitrate from Russia cheaper than I can by an american product that doesn't have near the freight.

 

[dun]

I have yet to figure out what 3 buck an hour wages in some third world country has to do with the prices. It isn;t the individual that's paying the fertilizer/petroleum, etc., it's the government and large business that are jerking these folks into the 20th (at least) century. They had better watch out becasue if the people get used to relative prosperity they'll have opened a pandoras box of problems.

 

[Jogeephus]

I have yet to figure out what 3 buck an hour wages in some third world country has to do with the prices. It isn;t the individual that's paying the fertilizer/petroleum, etc., it's the government and large business that are jerking these folks into the 20th (at least) century. They had better watch out becasue if the people get used to relative prosperity they'll have opened a pandoras box of problems.

Dun, that brings to mind a statement made by a fella in a meeting regarding the future prices of pulpwood. He said the outlook was good since there were nearly a billion(?) chinese who would soon know what toilet paper is and how to use it. :lol:

 

[Cowdirt]

They had better watch out becasue if the people get used to relative prosperity they'll have opened a pandoras box of problems.

You're exactly right Dun. As under-developed countries' inhabitants climb that socio-economic ladder, a whole new set of problems come with the territory.

 

[FarmGirl10]

So back to hay.

We produce a lot more hay then we have use for (at one point we had over 500 acres of hay out). Don't say that hay producers try to screw everyone over. As soon as we knew that hay prices were gonna go through the roof for this winter, which was during 1st cutting of hay (our areas first cutting was down to less then 1/2 of what it normally is due to a late frost) we started telling all of our buyers to get all they're hay when it was only like $6.00 a bale (even if it was from someone else). One of the dairies that we've sold hay to for the last 4 years got lucky, we were running short on hay so we brought in a load of hay from northern Wyoming or southern Montana, at this point in the summer we could sell that hay for $400+ per ton (yes, i know thats a crazy price) they got it for $200 which was atlest $20 less a ton then everyone else was selling local hay for at the same time. So not all hay producers are trying to screw everyone else.

 

[Jim62]

I ran into the same thing as Jo. Back last May I couldn't get anybody to take my excess hay, even for just the cost of making it. And now, they're complaining about how high hay is. Go figger.........

 

[rdbigfarmboy]

What Traffic Will Bear = Selling Price (usually below cost)


I dont think most hay growers are gouging.
Locally a few truckers are buying at 30 to 35 and then back hauling and selling for 60, seems to be a gouge since the truck was returning empty. thats just me. I can see covering cost and maby a 20% profit for a quick sale.
I can not grow good hay for $30 per 5X5 roll, possibly 40.

For me the real issue is How do I get my cost down and my value up to the point I profit? Everything else is chasing the wind.

I use free cooking oil for fuel as much as possible. fuel
I use manure and ash as much as possible. fertilizer
I cut free grass as much as possible. extra hay
I buy everything as function & value oriented as possible. make a deal on everything

 

[Caustic Burno]

I know I'll get some hate mail from this one...lol...however:

The hay producers, feed & mineral people have a good formula for business:

Cost To Produce Product + PROFIT = Selling Price

Cattle People:

What Traffic Will Bear = Selling Price (usually below cost)

I know the producers of NON-cattle products know they have a lot of expenses to stay in business and have a captive audience for their products. However, how come the cattle people don't have the same leverage and all when it comes to selling one's product? We all know the answers already... ;-)

Anyway hay producers we've been contacting won't even estimate what their 2008 crop will sell for..."...depends on fuel, fertilizer, water, equipment, etc. costs". Seems like they have us by the ying-yang folks!

On the "brighter side" (?) anyone needing generic haygrazer (low protein) hay might take a trip around the country...seems there is a lot of that junk hay available for $20 to $35 a bale (including West Texas).

On our cattle profits Bill we won't stand together it is that simple. As soon as prices jump a little someone hauls a load to the barn when prices get low we are still hauling.
They know we can't afford to retain and hang on to the extra cattle, this years calf crop has to go somewhere due to land requirements and we need the money to keep the operation running.
Not many people can keep a cow proped up 2 or 3 years with no return on investment.

 

[Scotty]

Farmers are the only ones that buy retail and sell wholesale. :stop: Surely I jest. Dun, I know three American farmers that purchased land in Brazil. They said they work for 5 dollars a DAY, not 3 an hour.

 

[dun]

Farmers are the only ones that buy retail and sell wholesale. :stop: Surely I jest. Dun, I know three American farmers that purchased land in Brazil. They said they work for 5 dollars a DAY, not 3 an hour.

I was using rdbigfarmboy figure.

 

[stocky]

Running Arrow, on the hay issue, no one has any idea what the hay price might be next year because of all the variables about demand. 3 years ago where I am, you could get all the bales you wanted for 10 dollars per bale or less. Those same bales sold for up to 100 dollars per bale last winter. It is all based on demand.
The people who sell hay in advance of it being grown figure a price that they can live with and if there is a buyer who feels they can live with that purchase price, there is a sale. However, almost all the sellers want to wait so they dont sell too cheaply and the buyers want to wait so they dont pay too much.
I base my hay purchases on what I feel the cattle will pay for and me still make money. For the 10 years before last winter, I averaged from 12-18 dollars per bale by buying in advance and by buying surplus and by buying alot of hay in March for the coming year. Last winter, I averaged just over 20 dollars. This winter, it is running around 25. This is for good quality fescue/orchardgrass/clover/johnsongrass mixes of 4x6 or 5x6 bales of hay.
I keep a couple hundred mama cows and I figure I can pay up to 25 dollars per bale and keep that many cows. If it costs more than 25, that means selling cows. I figure I can buy cows and pay up to 16-18 dollars per bale. In years past, I bought about 1200 bales to feed the 400-500 cows I would buy in the fall and sell in the spring. However, with the hay averaging 25 dollars this year, I bought no cows and I bought no hay for those cows.
This is an example of what I mean by the demand tells the price of the hay. There is an extra 1200 bales out there that I normally would have bought but were priced too high for me to buy and are still for sale. There are also 400 cows that were sold without me bidding on them.
There are alot of other people who do what I do and if the hay is too high, it hurts the hay seller and the cow seller both. The problem is the squeeze between the costs of production of the hay seller and what the cattleman can afford to pay. Now, with the cattle prices going down as fast as they are, it is putting alot of pressure on what cattlemen can afford to pay for hay. There comes a point where you cannot buy hay and feed cows if you are just donating your time or losing money. Right now, here, there is a huge surplus of hay, but the sellers do not want to sell for a loss. In March, they will make the decision of whether to sell at a loss, or keep the hay for another year. This is a normal decision to have to make in most years.
I cannot imagine how all you people make it that are paying the prices I am reading for hay. I feel for you. Sorry for the long post.

 

[novatech]

I don't know how the hay producers make it at $25 much less $10 to $18.
It makes just as much sense for the hay producer to hold on to his hay until he can get a better price as it does for cattlemen to hold their stock until the price goes up.
With the increase in the price of hay it is important for the cattle producer to analyze his inputs as to cost of nutrition. Buying low quality hay may seem cheap but if you break down the nutritional value by the pound I think you would come out ahead paying more for high quality as supplements are expensive. I have always found that buying protein in the form of hay is far cheaper than lick tubs.