It is a well known fact that when the cows and calves go out on the summer grazing until September, cattle prices level out, or even go in the tank. There is no significant marketing activity until fall. Many auction markets don't even have sales in the summer, or go on a monthly or biweekly schedule.
Fed cattle at the feedlots were $1-$2 lower last week, and feeder cattle futures crashed on the Chicago Mercantile Exchange. Early last week, before the futures crash, feeder cattle were $1-$2 higher at the local auctions. Later week sales were barely steady.
High feed and energy prices make it dicey whether feeder cattle at the current prices will pencil in the fall, when the cattle come in off the summer grass and are sold. Some analysts have been predicting lower feeder cattle prices for weeks, as a result. Such predictions may finally be coming true. The main summer marketing activity are the big video auctions, for fall delivery. Such prices are usually better than what the fall market proves to be and ranchers were usually smart to sell on the summer video.
Last week's first of the season video event started strong, but dropped noticeably once the the Merc feeder cattle futures tanked. Whether this was a one time occurance, or a harbinger of things to come, remains to be seen.
Cattle numbers are down, due to drought, range fires and bad winter weather a couple of years ago. A lot of cows have been slaughtered, and the calf crop was down. This may well keep feeder cattle prices up, despite feeder and fuel costs, but it may well be into fall before we find out.
It will be an interesting summer for market watchers.
Saturday, June 7, 2008
Friday, June 6, 2008
World oil price hits agriculture double
It's bad enough to run the family chariot down to the gas station for a serving of that $4 petrol.
Those in the worst shape are those that make their living using fuel, like truckers. Even worse are farmers and ranchers, who not only run trucks and tractors over the soil on $5 diesel, but use fertilizer made from oil, pump irrigaton water using oil or natural gas, and then ship the resulting crop on trucks whose fees are jacked up because of high fuel prices.
This is a serious economic dislocation, and it is needless, if only the liberals in Congress would stand back and let the free enterprise system solve it. The United States has 139 billion barrels of oil readily accessible in Alaska and off the coasts of California, Florida and Texas that Congress will not allow to be drilled, because they are "environmentally fragile."
Using old methods, with less "green" mentality, that could once have been the case. Modern equipment and technology leaves very little footprint and requires dramatically less land than it once did to drill for oil. The various oil spills of the last 10 years have led the way in developing "spill proof" technologies. Actual environmental damage, and particularly potential, damage are miniscule now days.
Can you imagine what 139 billion barrels of non-OPEC oil would do to the world market and the price of oil? Just watch how OPEC prices oil, when suddenly the United States starts importing about half as much. The free enterprise system, if allowed to function unfettered, can solve this problem.
What we have are Big Government Liberals, who want to control the economy, people's lives and livelihoods--making everything completely dependent on them. It is a Robin Hood socialist scheme, to level the playing field, so everyone is equally poor and dependent. They don't want the oil crisis to be solved. They want oil prices to go even higher, so they can have even more contol.
Those in the worst shape are those that make their living using fuel, like truckers. Even worse are farmers and ranchers, who not only run trucks and tractors over the soil on $5 diesel, but use fertilizer made from oil, pump irrigaton water using oil or natural gas, and then ship the resulting crop on trucks whose fees are jacked up because of high fuel prices.
This is a serious economic dislocation, and it is needless, if only the liberals in Congress would stand back and let the free enterprise system solve it. The United States has 139 billion barrels of oil readily accessible in Alaska and off the coasts of California, Florida and Texas that Congress will not allow to be drilled, because they are "environmentally fragile."
Using old methods, with less "green" mentality, that could once have been the case. Modern equipment and technology leaves very little footprint and requires dramatically less land than it once did to drill for oil. The various oil spills of the last 10 years have led the way in developing "spill proof" technologies. Actual environmental damage, and particularly potential, damage are miniscule now days.
Can you imagine what 139 billion barrels of non-OPEC oil would do to the world market and the price of oil? Just watch how OPEC prices oil, when suddenly the United States starts importing about half as much. The free enterprise system, if allowed to function unfettered, can solve this problem.
What we have are Big Government Liberals, who want to control the economy, people's lives and livelihoods--making everything completely dependent on them. It is a Robin Hood socialist scheme, to level the playing field, so everyone is equally poor and dependent. They don't want the oil crisis to be solved. They want oil prices to go even higher, so they can have even more contol.
Thursday, June 5, 2008
Biggest beef day of the year coming up
The biggest single day in the year for beef sales and consumption in the U.S. is Father's Day, set this year on Sunday, June 15.
This isn't just a coincidence or an accident, but follows decades of planned promotion, first by the industry's original women's auxiliary, the Cowbelles, and then picked up as a major beef promotion by the National Livestock and Meat Board.
Outdoor barbecues, big roast beef and prime rib dinners, steaks any way you cook them--men love this, and wives and daughters cook it all for Father's Day, because in the family, Dad's the lead beef eater. It's an easy way and safe way to make his day special.
This all just existed in the lore of the beef industry, until one day USDA and Beef Board statisticians starting breaking out the beef sales data and extrapolating all nuances and buildup. Lone behold, Father's Day is a big beef sales day.
Grocers and restaurants have been telling them that, as the year's of special Father's Day promotions built their business and is now annual staple of the promotional calendar. Wholesalers are booking product now, to have it ready to go as the orders pour in.
The trickle-down effect for farmers and ranchers, feedlot operators and others in the beef production chain is real. The original promotion percolated up from these grassroots, and now they annually harvest the results.
This isn't just a coincidence or an accident, but follows decades of planned promotion, first by the industry's original women's auxiliary, the Cowbelles, and then picked up as a major beef promotion by the National Livestock and Meat Board.
Outdoor barbecues, big roast beef and prime rib dinners, steaks any way you cook them--men love this, and wives and daughters cook it all for Father's Day, because in the family, Dad's the lead beef eater. It's an easy way and safe way to make his day special.
This all just existed in the lore of the beef industry, until one day USDA and Beef Board statisticians starting breaking out the beef sales data and extrapolating all nuances and buildup. Lone behold, Father's Day is a big beef sales day.
Grocers and restaurants have been telling them that, as the year's of special Father's Day promotions built their business and is now annual staple of the promotional calendar. Wholesalers are booking product now, to have it ready to go as the orders pour in.
The trickle-down effect for farmers and ranchers, feedlot operators and others in the beef production chain is real. The original promotion percolated up from these grassroots, and now they annually harvest the results.
Wednesday, June 4, 2008
Green grass always creates optimism
Feeder cattle prices for critters light enough to turn out on grass were up $1-$3 at the local auctions last week. There is no way you can pencil probable fall cattle prices, when they come in off the range, and other input costs, and make them show a profit at these prices.
What former Fed Chairman Alan Greenspan called "irrational exuberance" is at play here. There's been rain, and good winter moisture, in enough places to create very good spring grazing conditions. Once ranchers see that grass, they just have to have something to turn out on it. They head to the sale barn, bid against each other for cattle, and drive up prices. It's great for cattle sellers, but maybe not so great for buyers.
A lot can happen between now and the fall cattle marketing season. A grain glut could drop prices. Cattle numbers could be shorter than USDA is estimating, creating higher fall prices than is currently predicted due to a cattle shortage. Bad weather could wipe out some cattle, or create drought that will force cattle to be sold early--elongating the marketing cycle.
Buying spring grass cattle is a big crapshoot in the best of years, and more than that this year. There will be winners and losers, as there always are, and it's too early to predict who those will be.
What former Fed Chairman Alan Greenspan called "irrational exuberance" is at play here. There's been rain, and good winter moisture, in enough places to create very good spring grazing conditions. Once ranchers see that grass, they just have to have something to turn out on it. They head to the sale barn, bid against each other for cattle, and drive up prices. It's great for cattle sellers, but maybe not so great for buyers.
A lot can happen between now and the fall cattle marketing season. A grain glut could drop prices. Cattle numbers could be shorter than USDA is estimating, creating higher fall prices than is currently predicted due to a cattle shortage. Bad weather could wipe out some cattle, or create drought that will force cattle to be sold early--elongating the marketing cycle.
Buying spring grass cattle is a big crapshoot in the best of years, and more than that this year. There will be winners and losers, as there always are, and it's too early to predict who those will be.
Tuesday, June 3, 2008
South Korean beef circus continues II
Today the government of South Korea, as it was predicted here and elsewhere, acquiesed to street demonstrators and vegetarian animal rights radicals, to postpone bringing in any U.S. beef and to not allow it from animals older than 30 months.
Both these conditions are opposite what was agreed to in the trade accord recently negotiated with the U.S. Despite talking bravely at the start about toughing it out and upholding the deal, the South Korean Premier caved in the face of radical pressure.
This is particularly hypocritical on both the Premier and the Demonstrator's parts, as South Korea leads Asia and rivals European nations in the number of confirmed BSE cases in its domestic cow herd. The U.S. has two cases, both in cattle imported from Canada. South Korea is now over 30, in a much smaller cow herd.
Rather than foisting its risky domestic beef off on the Korean consuming public, the government needs to import safe, wholesome U.S. beef to protect its citizens. This is the tact the Premier needs to take, rather than wringing his hands and trying to placate everybody. He obviously hasn't learned the truth of the old saw "He who walks down the middle of the road gets shot at from both sides."
This, in microcosm, is the story of world trade. It is governed by politics, not economics. It is a matter of "what have you done for me lately," and which pressure the politicians making the decision can best stand up to.
Now it is a matter of President Bush and Congress holding Korea's feet to the fire, refusing to approve any of the trade deal without the key beef portion that Korea is trying to renege on. Korea needs the U.S. market and low duties for its manufactured goods, a lot worse than the U.S. needs to sell ag products in Korea.
President Bush, something of a rancher and cattleman himself, from the great cattle state of Texas, has repeatedly stood up for the beef industry in trade negotiations. It is likely he will again, on the Korean pact, but Congress, in an election year, is a whole different matter.
Both these conditions are opposite what was agreed to in the trade accord recently negotiated with the U.S. Despite talking bravely at the start about toughing it out and upholding the deal, the South Korean Premier caved in the face of radical pressure.
This is particularly hypocritical on both the Premier and the Demonstrator's parts, as South Korea leads Asia and rivals European nations in the number of confirmed BSE cases in its domestic cow herd. The U.S. has two cases, both in cattle imported from Canada. South Korea is now over 30, in a much smaller cow herd.
Rather than foisting its risky domestic beef off on the Korean consuming public, the government needs to import safe, wholesome U.S. beef to protect its citizens. This is the tact the Premier needs to take, rather than wringing his hands and trying to placate everybody. He obviously hasn't learned the truth of the old saw "He who walks down the middle of the road gets shot at from both sides."
This, in microcosm, is the story of world trade. It is governed by politics, not economics. It is a matter of "what have you done for me lately," and which pressure the politicians making the decision can best stand up to.
Now it is a matter of President Bush and Congress holding Korea's feet to the fire, refusing to approve any of the trade deal without the key beef portion that Korea is trying to renege on. Korea needs the U.S. market and low duties for its manufactured goods, a lot worse than the U.S. needs to sell ag products in Korea.
President Bush, something of a rancher and cattleman himself, from the great cattle state of Texas, has repeatedly stood up for the beef industry in trade negotiations. It is likely he will again, on the Korean pact, but Congress, in an election year, is a whole different matter.
Monday, June 2, 2008
Nation's cowherd probably dropping in size
Most statisticians are forecasting a drop in size in the nation's cowherd in 2008, due to several factors.
One certainly is high feed costs. Corn and other grains at record levels make it impractical to keep any more cattle than a rancher can winter on just his own forage. The competition for corn with the ethanol industry has driven prices through the roof, and with government subsidies of over 50 cents a gallon, ethanol manufacturers can afford to buy it and ranchers can't.
High fuel costs make all cattle industry inputs more expensive, and particularly transportation. Cattlemen will be shipping fewer cattle shorter distances to compensate, which mitigates in behalf of holding down herd size.
Weather, both drought and excessive moisture and storms, has forced cattlemen to cull cows due to shorter pastures. It makes it even less likely they will hold back heifers to breed, with higher costs and less feed. A certain number have to be held back just to keep numbers even, and more held back to expand herds.
Neither is likely to happen, analysts say, this year. With calf prices at profitable levels, it makes more sense to take the money and run, rather than not only hold on to heifers, but do so on a higher-cost basis.
In 2008, it just ain't gonna happen.
One certainly is high feed costs. Corn and other grains at record levels make it impractical to keep any more cattle than a rancher can winter on just his own forage. The competition for corn with the ethanol industry has driven prices through the roof, and with government subsidies of over 50 cents a gallon, ethanol manufacturers can afford to buy it and ranchers can't.
High fuel costs make all cattle industry inputs more expensive, and particularly transportation. Cattlemen will be shipping fewer cattle shorter distances to compensate, which mitigates in behalf of holding down herd size.
Weather, both drought and excessive moisture and storms, has forced cattlemen to cull cows due to shorter pastures. It makes it even less likely they will hold back heifers to breed, with higher costs and less feed. A certain number have to be held back just to keep numbers even, and more held back to expand herds.
Neither is likely to happen, analysts say, this year. With calf prices at profitable levels, it makes more sense to take the money and run, rather than not only hold on to heifers, but do so on a higher-cost basis.
In 2008, it just ain't gonna happen.
Sunday, June 1, 2008
It's gotta fit the box
Meat packing is a mass-produced, factory operation. As such, all the automated equipment and processing lines are set up to fit an 1100-pound carcass. Carcasses significantly smaller or larger than this have to be hand-processed, costing the packer a great deal more--costs which are discounted off the price received by the cattle owner.
That's why all breeds of cattle, and cross breeders of commercial cattle, stress uniformity in breeding and seek the optimal sized animal. In the biz, it's called "fitting the box."
Primal cuts of beef are shipped from the packing plant to wholesalers or meat purveyors in uniform-sized cardboard boxes that stack together well on pallets and on trucks, hence the term.
Breeds or breeders who consistently vary their animals from these size standards pay for it in the end. So-called miniature breeds, which are promoted on the basis that they are easier to handle on small farms, easier for 4-H kids to handle or because they're cute--ultimately don't work, both because their carcasses are too small to fit the box, and the feed savings in feeding a smaller animal don't compensate for the discounted price on fewer pounds of beef.
People with lots of feed, frequently that they've raised it themselves, feed cattle to heavier weights because they have the feed, but ultimately receive less from packers, who must hand-process their carcasses. It's a poor return on their grain.
Freedom of choice is one of the vaunted rights cattlemen trumpet, but its limited by the size of the box, as in "boxed beef." It's a lesson some learn the hard, costly way.
That's why all breeds of cattle, and cross breeders of commercial cattle, stress uniformity in breeding and seek the optimal sized animal. In the biz, it's called "fitting the box."
Primal cuts of beef are shipped from the packing plant to wholesalers or meat purveyors in uniform-sized cardboard boxes that stack together well on pallets and on trucks, hence the term.
Breeds or breeders who consistently vary their animals from these size standards pay for it in the end. So-called miniature breeds, which are promoted on the basis that they are easier to handle on small farms, easier for 4-H kids to handle or because they're cute--ultimately don't work, both because their carcasses are too small to fit the box, and the feed savings in feeding a smaller animal don't compensate for the discounted price on fewer pounds of beef.
People with lots of feed, frequently that they've raised it themselves, feed cattle to heavier weights because they have the feed, but ultimately receive less from packers, who must hand-process their carcasses. It's a poor return on their grain.
Freedom of choice is one of the vaunted rights cattlemen trumpet, but its limited by the size of the box, as in "boxed beef." It's a lesson some learn the hard, costly way.
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