simme
Old Dumb Guy
I thought this was an interesting article in Drovers.
I think it fits with a principle I have observed over my lifetime. People tend to take action too late in a cycle. Look at personal investments. People tend to look at the recent past. Then invest when the market is near a peak after a long upwards run. Then are hesitant to get out until there has been a significant decline.
My working career was associated with the pulp and paper industry. I certainly saw a pattern there. There are many grades of paper - requiring different equipment and processes to produce. The industry would tend to try to make profit by volume. As the market saturates due to supply, profits drop. Then the paper mills look at grades where there is money to be made based on the recent past. Then a big spending program to convert the mill for the new grade. Several mills would look at that same data and also convert to that grade around the same time. You can see what that new supply does to the price for that new grade in a few years. That old grade - less supply due to fewer mills making it, so maybe an opportunity there. It becomes that vicious circle.
Based on the article, looks like the tide will swing soon in beef production. Anyone remember Earl Butz - secretary of agriculture who encouraged US famers in the 70's to plant crops from fencerow to fencerow. Seems like the 80's were not good for row crop farmers. Might have planted too much.
I think it fits with a principle I have observed over my lifetime. People tend to take action too late in a cycle. Look at personal investments. People tend to look at the recent past. Then invest when the market is near a peak after a long upwards run. Then are hesitant to get out until there has been a significant decline.
My working career was associated with the pulp and paper industry. I certainly saw a pattern there. There are many grades of paper - requiring different equipment and processes to produce. The industry would tend to try to make profit by volume. As the market saturates due to supply, profits drop. Then the paper mills look at grades where there is money to be made based on the recent past. Then a big spending program to convert the mill for the new grade. Several mills would look at that same data and also convert to that grade around the same time. You can see what that new supply does to the price for that new grade in a few years. That old grade - less supply due to fewer mills making it, so maybe an opportunity there. It becomes that vicious circle.
Based on the article, looks like the tide will swing soon in beef production. Anyone remember Earl Butz - secretary of agriculture who encouraged US famers in the 70's to plant crops from fencerow to fencerow. Seems like the 80's were not good for row crop farmers. Might have planted too much.
