How Long Will This Market Last?

[JWBrahman]

Please explain to my how & why Beef prices will decrease.. If we are (U.S.A.) is projected to increase it's export of beef, but the amount of cattle being raised is decreasing. And we are also improt more beef... I'm not argueing.. just want to know what I'm missing?

One reason prices are in a bubble right now is because banks are paying negative real interest rates on savings. Money is looking for a home where it can generate gains. That is why you see so many new people jumping into the cattle business. Once you and I can put money in the bank and get at least 3% returns the dynamics will change.

Another reason that prices will fall is the vertical integration of the cattle market. Nearly all of the large herds around here are contract herds owned by Tyson. Tyson contracts with the land and cattle companies. The land and cattle companies are just like the pork and poultry producers. When Tyson decides it has enough of its own cattle to fill orders the prices at the sale barn will drop quick.

A lot of people give Doc grief but the man knows what he is talking about concerning the price spread between choice and select. Just talked to one of the buyers the other day and he told me that there is a roughly $150 spread between choice and select, which is like selling two steers instead of just one. If you are producing carcass quality you will be somewhat insulated from the price drop, but as for the rest...

The guys who have been at this for generations around here are selling out this year. This is a once in a decade opportunity to move out of the red. But the old timers and old ranch families understand that it is better to have a big ego because of your bank roll as opposed to having nice photographs for the internet. You cannot pay your taxes with pleasant comments from people nobody has ever met in person.

 

[Caustic Burno]

Talked with an old friend yesterday that said he was hauling everything but a few to the barn.
Said he was going to keep enough for tax purposes. I ask what made him to decide to dump and his reply was I am making less a head today than I was twenty years ago percentage wise and that is losing ground. He said diesel and fertilize is up 400%, equipment is up a 100 to 200% and calf prices have went up a 100 to 150%. He said everybody is jumping up and down over 2.00 a pound calves when they should be at least 3 to have kept up. He made some good points that I don't disagree with. I think the age factor is playing in as well.
I haven't seen a survey in a while, the last one I did see the average age of a cattleman was 60+.

 

[greybeard]

Talked with an old friend yesterday that said he was hauling everything but a few to the barn.
Said he was going to keep enough for tax purposes. I ask what made him to decide to dump and his reply was I am making less a head today than I was twenty years ago percentage wise and that is losing ground. He said diesel and fertilize is up 400%, equipment is up a 100 to 200% and calf prices have went up a 100 to 150%. He said everybody is jumping up and down over 2.00 a pound calves when they should be at least 3 to have kept up. He made some good points that I don't disagree with. I think the age factor is playing in as well.
I haven't seen a survey in a while, the last one I did see the average age of a cattleman was 60+.

Finally--something I'm above average in..

 

[TexasBred]

For once he have a market based on supply and demand.

 

[cross_7]

For once he have a market based on supply and demand.

That's it right there
You can dissect it anyway you want, but that it right there
When the supply catches up with the demand
The variables that factor into it is what can't be determined

 

[bigbull338]

CB what your friend said is nothing new.but if the calves brought a bottom price of $2 a lb no matter their weight.then everything would go up that much more.we ran the dairy for almost 28yrs with feed at $9/100 an milk at $15/100.but after we sold out feed went to $15/100 an milk $22/100 or more.thus making all the imputs go up to suck the the extra profit out.

 

[Tim/South]

Supply and demand is correct.
When the demand drops like it did last week, the slaughter numbers decrease. It was not long ago that the U.S. processed 650,000 per week. Last week is was back up to 620,000 or so. The week before it was closer to 600,000. Beef prices must remain affordable or the consumer backs away.
Food stamps went from 30 Billion dollars in 2007 to 70 Billion now. A lot of that 40 Billion increase is buying beef products. The working American public is paying for a lot of free meals.
The supply is obviously down. The demand does not need to follow.
The economics are not as simple as us having the smallest cattle herd since 1952.
The Choice/Select spread and the price of boxed beef regulate the slaughter numbers. Not the supply, but the demand. It takes both.

 

[chukar]

I see it as an opportunity to cash out, get out of debt, and slowly get back in as cash allows. Sure selling $1000 calves is nice, but with hay prices where they are(at least locally), there is not a pencil in the world sharp enough to make it work.

My only concern is the hit on capital gains. I know it is poor judgement to take tax advice from an Internet forum, but plenty of folks on here sold down/out due to the drought of late. Can you average those gains over several years?

 

[bigbull338]

chukar if you sell out completely the only way to avoid paying taxes is reinvest the money on the farm asap.

 

[Stocker Steve]

Talked with an old friend yesterday that said he was hauling everything but a few to the barn.
Said he was going to keep enough for tax purposes. I ask what made him to decide to dump and his reply was I am making less a head today than I was twenty years ago percentage wise and that is losing ground. He said diesel and fertilize is up 400%, equipment is up a 100 to 200% and calf prices have went up a 100 to 150%. He said everybody is jumping up and down over 2.00 a pound calves when they should be at least 3 to have kept up. He made some good points that I don't disagree with.

Can not disagree with the percentages. Seems like a sustainable operation needs to find a way to reduce or eliminate or be more efficient with certain inputs. The local implement dealers really loaded up on tractors and haying equipment this fall, so they must not think their piece of the pie is being reduced.

I have started grid testing, and for now, spending more on lime and seed.

 

[TexasShooter]

A lot of good comments and questions…good discussions about expenses and costs as well. Here are my comments about some ideas that I am implementing this year. Maybe some of you practice them already or have been thinking about doing them or something similar.

I know in different areas of the country and weather patterns effect what I am about to say. I have done a lot of research and based on my operation size, land, location, weather and grasses I have made a significant investment in trying to establish a legume (clover) that will comeback every year, provide excellent grazing and produce valuable nitrogen to my spring/summer grasses. I spent what I could afford this year and would like to further expand the idea and add perennial rye and evaluate my summer grasses as well. Currently my summer grasses are native grasses and coastal bermudagrass.
I am establishing 2 new practices for my operation that I haven't done before.

One is stockpiling. Stockpiling forage is the practice of accumulating forage growth intended for grazing and used in another season –winter for me. Stockpiling forages beginning in late summer or early fall provides late fall and winter grazing. So far this fall/winter I haven't had to feed a bale of hay to date.

In addition to stockpiling, my second new practice is rotational grazing. Rotational grazing promotes an even distribution of grazing throughout a paddock. This allows resting periods in between rotations which will maintain the health of grass.

In the previous years due to weather conditions, etc. I have had to start feeding hay in the summer. The cost of hay and feed for winter feeding is the largest expense for maintaining my cattle herd. This is my first winter season of these practices and so far it has saved me thousands of dollars. I can't begin to tell you how large of an impact this has made to my land, operation and pocket book.

 

[Shadscale]

Had a good ol rancher tell me the other day that calf prices should be in line with a gallon of fuel. He said that's when he made the most money. That being years ago.

 

[herofan]

Talked with an old friend yesterday that said he was hauling everything but a few to the barn.
Said he was going to keep enough for tax purposes. I ask what made him to decide to dump and his reply was I am making less a head today than I was twenty years ago percentage wise and that is losing ground. He said diesel and fertilize is up 400%, equipment is up a 100 to 200% and calf prices have went up a 100 to 150%. He said everybody is jumping up and down over 2.00 a pound calves when they should be at least 3 to have kept up. He made some good points that I don't disagree with. I think the age factor is playing in as well.
I haven't seen a survey in a while, the last one I did see the average age of a cattleman was 60+.

I've heard some older farmers say similar things around here. They say they actually made more several years ago when cattle prices were much cheaper because fuel and such wasn't so expensive.

 

[Bigfoot]

I'm starting to pull together some numbers to get my taxes forecasted. My single biggest expense on my cow calf herd is fertilizer. Second is fuel, mineral and meds are running about equal. I've about depreciated out everything, so that's not part of the equation. I'm also not selling these $2 a pound calves that I see touted on here. It's more like $1.50. I would gladly trade back to .80 cent calves if farm diesal was still .80 cents a gallon, and I could fertilize hay ground for $20 an acre.

 

[HDRider]

Talked with an old friend yesterday that said he was hauling everything but a few to the barn.
Said he was going to keep enough for tax purposes. I ask what made him to decide to dump and his reply was I am making less a head today than I was twenty years ago percentage wise and that is losing ground. He said diesel and fertilize is up 400%, equipment is up a 100 to 200% and calf prices have went up a 100 to 150%. He said everybody is jumping up and down over 2.00 a pound calves when they should be at least 3 to have kept up. He made some good points that I don't disagree with.

Can not disagree with the percentages. Seems like a sustainable operation needs to find a way to reduce or eliminate or be more efficient with certain inputs. The local implement dealers really loaded up on tractors and haying equipment this fall, so they must not think their piece of the pie is being reduced.

I have started grid testing, and for now, spending more on lime and seed.

Could you explain the term (method) grid testing? Thanks

 

[Stocker Steve]

Grid testing is when you break a larger field into (2.5 acre) pieces, take multiple samples for each piece including a GPS location, and then feed the results into mapping software which plots out N/P/K/ph/OM contours and the recommended inputs for a selected fertility level.

 

[Stocker Steve]

A big cow sale here last Saturday. Top younger stuff went for $1600 to $2100 each.
Ran short of buyers by the end. Big cows went to kill and smaller ones brought about $800 average. Should be able to make money on an in season $800 cow.
Seems like half of the cow sales here run short of buyers by the end. Do you see this?