Cattle feed price discussion.

IaGary · Dec 2, 2011

The higher price of cattle feed has been talked about lately on this forum.

Here are my thoughts on the subject.

Back when corn was 2.50 a bushel cattle producers were getting in the $80 range for finished cattle.

So a 1200lb steer brought $960.

When you had 100 bushel of corn in that 1200LB critter it cost you $250 for the corn.

$960-$250 for the corn left you $710 for the other expenses.

Now corn is $6 so we have $600 for corn. That steer is fetching a $1.20 a pound or $1440 for that 1200 LB steer.

$1440- $600 for corn leaves you $840 for the other expenses with todays prices.

I know your bean meal and other feed stuffs are higher as well. It seems to me it should pencil out if we don't get to carried away on the purchase price of that 600 calf to put on feed.

What am I missing?

Gary

mkirsch · Dec 2, 2011

Maybe it was in one of my drafts, and never made it to that thread, but I was thinking the same thing.

Like you said, corn is up but EVERYTHING is up.

It might take a while to get used to dealing with the bigger numbers, but if you look in your bank account at the end of the day, you'll notice there's more money in it.

So.... quit whining about the price of corn and how ethanol is ruining things for you.

Farmers are their own worst enemy. No other industry complains that the price of their finished product is TOO HIGH.

"Hey I'm making too much money!" WHAT?????

Anonymous-0 · Dec 2, 2011

1) The cost of the put (to assure breaking even) is up significantly
2) the cost of the bean meal is over double
3) the cost of the fuel, labor, electricity, shed repairs, etc, is all at least double
4) I bought a brand-new grinder-mixer for $8500 in about 1985 (I think). Now one is $40,000.
5) A good quality cattle gate is close to $200. I have bought dozens of them for $50 or less. Sometimes its the little things that getcha--they all add up.
6)Your $840 divided by 600# is $1.40 per pound. Without even considering the other expenses, you can't buy a 600 lb steer for $1.40

Your analysis is to simplistic.

This is the third year in 35 that my lot will be empty. Sometimes you have to know when to stay home from the party.

Nebraska Cowman · Dec 2, 2011

This was posted by Max Armstrong
"RETAIL BEEF PRICES, after hitting a record in 2010, will again in 2011, 2012, 2013, 2014 and 2015, says Purdue AG economist Chris Hurt"

Food in this country is still WAY cheap. I look for people to start eating better in the near future. We have seen indulgence in other consumer goods. Now we start seeing premium coffees and other things and I believe indulgence in food in general is the next wave. Hang on world.

Nebraska Cowman · Dec 2, 2011

You sold your cows too soon Gary. But yeah, maybe you can make it up feeding calves.

AG in IN · Dec 2, 2011

(quoted from post at 14:52:16 12/02/11) This was posted by Max Armstrong
"RETAIL BEEF PRICES, after hitting a record in 2010, will again in 2011, 2012, 2013, 2014 and 2015, says Purdue AG economist Chris Hurt"

Chris Hurt is a marionette. Someone pulls his strings and makes him dance. I'm not saying he's wrong on this, though. I don't have the crystal ball he has.

If a person would do the opposite of what he's said about hogs about 75% of the time in the last 5 years, your wallet would be better off than if you listened to him.

From seeing him on tv and in person, he appears quite p-o'ed that there are still smaller family farms that aren't "vertically integrated" out there.

AG

randallnMo · Dec 2, 2011

Gary, probably the biggest thing you're missing is the cost of the calf. Calf prices are $140.00-$146.00 cwt. Now put your pencil to it.

Ken Macfarlane · Dec 2, 2011

We only have grass fed beef here, prices are still low for us. Pasture all growing over everywhere. Calf prices are high though.

IaGary · Dec 2, 2011

I hear that the costs of the calves are too high.

Who sets the price for feeder calves?The buyers that put them in the feedlot.

The high price of corn may hold the price down for feeders but does not raise it unless the buyers do.

Who ever is paying that 1.40 for 600 pounders must think he can make it work with high price corn or he would not buy them and the price would go down on feeders with less demand.

As far as the hard goods being higher, corn did not make iron go up.

Gary

WyoDave · Dec 2, 2011

It's not the cost of the calves that are too high, it's the cost of the corn that is much too high. If corn was down at that $2.50 where it belongs maybe the feeders could pay $1.80 for 600 lb calves. All depends on how you look at it, and mainly what you're selling.
David

IaGary · Dec 2, 2011

I know what your saying Dave but at $2.50 a bushel the corn farmer is working at a loss. Even when input cost were lower.
The cow/calf guy would be making a killing.

I think the cow/calf guy is selling at record profits just as the corn farmer is.

Supply and demand will balance all things out. It always has and will.

Gary

RGMartin · Dec 2, 2011

(quoted from post at 18:56:34 12/02/11)

Supply and demand will balance all things out. It always has and will.

I doubt it, the government will get involved and screw it up.

WyoDave · Dec 2, 2011

Definitely, and I agree it's good when everyone is making money. It's just an ever changing market, and almost impossible to predict long term. I had lunch today with a buddy of mine who is a fat cattle buyer for one of the major packers. Last info from his boss was they were losing $126 for every head they slaughter. Demand for beef was slipping and fat cattle prices are high. Now even he will admit that they stretch that number, but the truth is, the packers probably are losing some money with these prices. At some point it has to go the other way, and it will. Fat prices will fall, which means feeders won't be able to afford these corn and calf prices, and they'll both soften and prices will fall too. When, who knows, but it will happen. How low, is hard to guess because at this point it's hard to tell how much of the rise is due to demand, and how much is due to good ole fashioned inflation. That's just my take on the matter though.
David

tjdub · Dec 2, 2011

> Who ever is paying that 1.40 for 600 pounders must think he can make it work with high price corn or he would not buy them and the price would go down on feeders with less demand.

I think that the big feedlot operators are covering all their bases by locking in their prices with futures. If you look ahead to when these $1.40 600lb calves hit 1400lbs, the price for fat cattle is projected to be $1.30, so it pencils in. The big operators have their prices locked in, so they don' t have the risk and that keeps the feeder price up. I worry about the small feedlot operators who deal in cash prices because in these volatile markets, a lot can happen by Spring 2013.

Ed in Northern VA · Dec 2, 2011

So are you going to start putting your fences back up? (c block lurker)

IaGary · Dec 2, 2011

Heck no.

RodinNS · Dec 3, 2011

Gary.... you need more cows. The only one making anything in that chain in the last 9 years is the packer, and they've made windfall profits for a good part of that time. At least up here they have anyway.
Our beef industry has contracted in a considerable way since 2003 and it wasn't because of all the money we were making. Prices have just recoverd this year back to where someone might make a little bit...
I know 2.50 corn is no good for you but 70 cent feeders are no good for us with cow/calf herds either...

Rod

Cattle feed price discussion.

IaGary

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mkirsch

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Anonymous-0

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Nebraska Cowman

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Nebraska Cowman

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AG in IN

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randallnMo

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Ken Macfarlane

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IaGary

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WyoDave

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IaGary

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RGMartin

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WyoDave

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tjdub

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Ed in Northern VA

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IaGary

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RodinNS

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