Farmers and ranchers are not immune to the stock market crash and recovery. Monday was truly Black Monday for owners of livestock or grain crops, as the futures market crashed and drove cash prices through the floor.
This time of year, many farms and ranches get their annual income in one week, from the sale of their calf crop or grain crop. A precipitous drop like Monday's, over which they have no control, is a disaster.
If you own stocks and bonds, you only took the hit if you sold them. As a farmer and rancher, if your crop came to market Monday, you took the full hit. Even if it were possible to pull it back off the market--which is tough, since you've already paid to ship it for sale that day--you incur substantial costs.
Commodities recovered somewhat Tuesday, just like the Stock Market did. But that was too late for many hapless farmers and ranchers. The Big Boys on the Chicago Mercantile Exchange and the Chicago Board of Trade, where most commodities trade, only theoretically lost money Monday, and probably even made money from buying newly cheap contracts at the bottom Monday and selling them at a substantial profit Tuesday.
If you own actual, existing cattle or grain on the ground, you can't practically do that. You take the hit, and hopefully have enough left to move on. Such is the lot of the family farmer or rancher.
Tuesday, September 30, 2008
Saturday, September 27, 2008
U.S. beef still the preferred world choice
Tonight I ate dinner with a visiting missionary from Thailand, and took him to a medium-range U.S. steakhouse. It was sure all right, but definitely not in the Morton's, Ruth's Chris or Capitol Grille class.
We were just getting acquainted, and before he found out the breadth of my experience in the beef business, he proceeded to regale me with how one of his favorite benefits in visiting the U.S. is the beef. He travels the world, particularly Asia, but says he cannot beat beef in the U.S., especially for the price.
A good U.S. beef steak in Thailand, if you can find one, is very pricey. My daughter lives there, and I went there for Christmas to see her. We always have Prime Rib for Christmas dinner, and she wanted to continue that tradition. It was costly for a U.S. meal of imported U.S. beef, but worth it. Not having eaten U.S. beef for a year, my daughter was doubly impressed. But at some $40 a piece in Thailand, you sure wouldn't do it very often.
We in the U.S. beef industry trumpet these facts all the time, but sometimes we forget how consumers from other countries feel about our beef.
I was reminded tonight, and we must not forget that we do produce a vaunted and valued product. We must not let our guard down. Then we will surely continue to profit from foreign marketing. Definitely, the market is there and U.S. beef is the first choice.
We were just getting acquainted, and before he found out the breadth of my experience in the beef business, he proceeded to regale me with how one of his favorite benefits in visiting the U.S. is the beef. He travels the world, particularly Asia, but says he cannot beat beef in the U.S., especially for the price.
A good U.S. beef steak in Thailand, if you can find one, is very pricey. My daughter lives there, and I went there for Christmas to see her. We always have Prime Rib for Christmas dinner, and she wanted to continue that tradition. It was costly for a U.S. meal of imported U.S. beef, but worth it. Not having eaten U.S. beef for a year, my daughter was doubly impressed. But at some $40 a piece in Thailand, you sure wouldn't do it very often.
We in the U.S. beef industry trumpet these facts all the time, but sometimes we forget how consumers from other countries feel about our beef.
I was reminded tonight, and we must not forget that we do produce a vaunted and valued product. We must not let our guard down. Then we will surely continue to profit from foreign marketing. Definitely, the market is there and U.S. beef is the first choice.
Friday, September 26, 2008
Europeans slowly thaw toward U.S. beef
The hypocritical trade barriers to importing U.S. beef are slowly falling in Europe.
Major tourist hotels that cater to Americans are demanding better beef than the used dairy cows slaughtered in Europe for that purpose. A small amount of U.S. beef is quietly making its way onto the continent for the hotel restaurant trade.
The World Court has knocked down all the defenses Europe keeps throwing up to keep U.S. beef out and protect its farmers. Europe was the King of BSE a few years ago, and killed tens of thousands of cattle in an attempt to eradicate it. The two cases in the U.S., both in dairy cows imported from Canada, so pale by comparison, that this cannot be credibly used as an excuse.
The U.S. has much stiffer regulations on growth promotants in calves than the Europeans themselves do, so this one doesn't hold water either. What beef is being allowed in is all-natural, with no hormones or antibiotics used in raising it. Independent tests done on European beef show high levels of stilbesterol, the most dangerous and least used of the growth stimulants.
It is glacial progress at best, but encouraging to U.S. cattlemen, nonetheless.
Major tourist hotels that cater to Americans are demanding better beef than the used dairy cows slaughtered in Europe for that purpose. A small amount of U.S. beef is quietly making its way onto the continent for the hotel restaurant trade.
The World Court has knocked down all the defenses Europe keeps throwing up to keep U.S. beef out and protect its farmers. Europe was the King of BSE a few years ago, and killed tens of thousands of cattle in an attempt to eradicate it. The two cases in the U.S., both in dairy cows imported from Canada, so pale by comparison, that this cannot be credibly used as an excuse.
The U.S. has much stiffer regulations on growth promotants in calves than the Europeans themselves do, so this one doesn't hold water either. What beef is being allowed in is all-natural, with no hormones or antibiotics used in raising it. Independent tests done on European beef show high levels of stilbesterol, the most dangerous and least used of the growth stimulants.
It is glacial progress at best, but encouraging to U.S. cattlemen, nonetheless.
Thursday, September 25, 2008
Cattle carcasses gum up hurricane recovery
No one has an accurate count of how many cattle were lost in Texas and Louisiana in the Hurricane Ike debacle, but estimates are as high as 50,000 head.
What is known, is that as the water recedes in the affected areas, the dead cattle carcasses are rotting and polluting streams and drinking water--becoming a major public health menace.
It took longer than expected for the water to recede in many areas, so the decay of dead animals got a head start on the clean-up workers--becoming a real problem now. Quite properly, the focus has been on restoring electric power and safe drinking water too, so the rotting carcasses took a back seat.
It is doubly painful for cattlemen, because of not only the cost of losing substantial portions of their herd, but now the clean-up of their ranches and repair of fences and grazing.
The cattle that are alive are frequently far from home, as they took grazing anywhere they could get it, with no fences to stop them.
It is hard to look a trashed-out rancher in the eye, who has lost all or part of his herd to the hurricane, and make him see anything good that comes out of the carnage. But from a national beef industry perspective, the severe losses of mother cows do help keep overall cattle numbers in check and cattle prices higher.
It's hard to see, in the face of such devastation, but there is a minor silver lining in the cloud.
What is known, is that as the water recedes in the affected areas, the dead cattle carcasses are rotting and polluting streams and drinking water--becoming a major public health menace.
It took longer than expected for the water to recede in many areas, so the decay of dead animals got a head start on the clean-up workers--becoming a real problem now. Quite properly, the focus has been on restoring electric power and safe drinking water too, so the rotting carcasses took a back seat.
It is doubly painful for cattlemen, because of not only the cost of losing substantial portions of their herd, but now the clean-up of their ranches and repair of fences and grazing.
The cattle that are alive are frequently far from home, as they took grazing anywhere they could get it, with no fences to stop them.
It is hard to look a trashed-out rancher in the eye, who has lost all or part of his herd to the hurricane, and make him see anything good that comes out of the carnage. But from a national beef industry perspective, the severe losses of mother cows do help keep overall cattle numbers in check and cattle prices higher.
It's hard to see, in the face of such devastation, but there is a minor silver lining in the cloud.
Wednesday, September 24, 2008
Ag a credit-based business, liquidity squeeze real
For the average American, the inability of banks to make loans due to a lack of liquidity is more of a concept than a reality.
Unless you're on the cusp of buying a home, getting a student loan or need a second mortgage to finance your business or bail out a debt situation, you're largely unaffected.
For the average farmer or rancher, it is not a concept. Most get a loan at the bank each year to finance putting a crop in the ground or buy bulls to breed cows, as well as provide a paycheck to keep the family going, Once a year, when the crop or calves are sold, they pay off the loan and hopefully have a little profit left over.
Most small businesses operate this way. They are seasonal, in one way or another, and use credit to tide them over the down times. When banks don't have money to lend, they are up a tree. Some can figure out how to scrape by, borrowing from Peter to pay Paul, but many can't.
Their liquidity crisis is just as real--maybe more so--than the big boys. A few might get help, if drought or hurricanes can qualify them for low interest loans from the U.S. Department of Agriculture. This could tide some over, but for the majority that finance each year with the local bank, it could be tough times indeed.
Unless you're on the cusp of buying a home, getting a student loan or need a second mortgage to finance your business or bail out a debt situation, you're largely unaffected.
For the average farmer or rancher, it is not a concept. Most get a loan at the bank each year to finance putting a crop in the ground or buy bulls to breed cows, as well as provide a paycheck to keep the family going, Once a year, when the crop or calves are sold, they pay off the loan and hopefully have a little profit left over.
Most small businesses operate this way. They are seasonal, in one way or another, and use credit to tide them over the down times. When banks don't have money to lend, they are up a tree. Some can figure out how to scrape by, borrowing from Peter to pay Paul, but many can't.
Their liquidity crisis is just as real--maybe more so--than the big boys. A few might get help, if drought or hurricanes can qualify them for low interest loans from the U.S. Department of Agriculture. This could tide some over, but for the majority that finance each year with the local bank, it could be tough times indeed.
Tuesday, September 23, 2008
Financial crisis blowback, numbers sink cattle
Fall is always a challenging time for cattle prices, as the big numbers of calves come to the market from summer grazing. Its a supply-and-demand situation, and as the supply increases, demand doesn't always keep up.
It's even more challenging this fall, as the nation's financial crisis of failed home mortgages, Wall Street bail-outs and blowhard politicians cause people with money to grow more conservative by the hour, hanging on for dear life. At the cattle auctions this week, many buyers were on the sidelines, waiting for things to sort out. Feeder cattle were $2-$4 lower, fed cattle were only steady when they should be going up in the face of tight supplies--and even cull cows and bulls were lower.
It is easy to yawn, and say "so what?" if you're not affected. But for many farmers and ranchers, this is their annual payday, that won't come around again until next fall.
The market is being ruled by panic, speculation and fear rather than cattle industry fundamentals, which are sound. Supplies are tight, both in slaughter-ready cattle in the feedlots and the numbers of calves and yearlings available to restock them. Fundamentals would dictate that prices would stay strong, and maybe even go up.
But external forces beyond the control of the individual cattleman, and even the whole industry collectively, are calling the shots and costing the industry money.
Raising cattle is a risky business at best, what with weather, disease and balky markets to contend with. You're prepared for those, and even expect them.
But a Wall Street crisis percolating down to the ranch gate? Who'd a thunk it?
It's even more challenging this fall, as the nation's financial crisis of failed home mortgages, Wall Street bail-outs and blowhard politicians cause people with money to grow more conservative by the hour, hanging on for dear life. At the cattle auctions this week, many buyers were on the sidelines, waiting for things to sort out. Feeder cattle were $2-$4 lower, fed cattle were only steady when they should be going up in the face of tight supplies--and even cull cows and bulls were lower.
It is easy to yawn, and say "so what?" if you're not affected. But for many farmers and ranchers, this is their annual payday, that won't come around again until next fall.
The market is being ruled by panic, speculation and fear rather than cattle industry fundamentals, which are sound. Supplies are tight, both in slaughter-ready cattle in the feedlots and the numbers of calves and yearlings available to restock them. Fundamentals would dictate that prices would stay strong, and maybe even go up.
But external forces beyond the control of the individual cattleman, and even the whole industry collectively, are calling the shots and costing the industry money.
Raising cattle is a risky business at best, what with weather, disease and balky markets to contend with. You're prepared for those, and even expect them.
But a Wall Street crisis percolating down to the ranch gate? Who'd a thunk it?
Monday, September 22, 2008
Cattlemen not baffled by Google "discovery"
Those ubiquitous spies from the heavens, relentlessly staring down at us 24 hours a day by satellite--Google and Map Quest, among others--thought they'd discovered groundbreaking new scientific truth, when they observed that cattle out grazing always face north to south.
This has been repeatedly publicized by the popular media like the 7th Wonder of the World. If they only knew.
They were sure that it was the magnetism of the earth's core, or some supernatural revelation beamed directly into cow's brains that made them line up this way.
Well, cattlemen do know. More than one veteran rancher I've talked to said it's very simple. The prevailing winds blow most often from north to south. By lining up with the wind, cows keep flies off, and rain or snow pass them by. They are not fighting the wind, but using it.
A veteran, old-time pilot told me that they have always navigated their "string and baling wire" single engine plane by watching how the cows down below were lined up. and selecting their direction accordingly.
There you go. The latest high tech doesn't always expand knowledge. Sometimes, it needs to acquire some.
This has been repeatedly publicized by the popular media like the 7th Wonder of the World. If they only knew.
They were sure that it was the magnetism of the earth's core, or some supernatural revelation beamed directly into cow's brains that made them line up this way.
Well, cattlemen do know. More than one veteran rancher I've talked to said it's very simple. The prevailing winds blow most often from north to south. By lining up with the wind, cows keep flies off, and rain or snow pass them by. They are not fighting the wind, but using it.
A veteran, old-time pilot told me that they have always navigated their "string and baling wire" single engine plane by watching how the cows down below were lined up. and selecting their direction accordingly.
There you go. The latest high tech doesn't always expand knowledge. Sometimes, it needs to acquire some.
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