There are two propositions either meats are the next leg of the ag boom due to the greater demand for more protein from emerging economies or alternatively due to food shortages grain will be diverted from meats to food and fuel usage.
Last week we were discussing the phenomenon of farmers selling their cattle in order to make room for valuable grain in their field. An article in Tulsa World helps explain what's putting downward pressure on cattle prices:
U.S. feedlots slashed purchases of young cattle 11 percent last month, more than expected, as costs for corn-based feed surged and losses widened.
Feedlots bought 1.736 million young animals in March, down from 1.96 million a year earlier, the U.S. Department of Agriculture said Friday in a report. The average estimate of 10 analysts surveyed by Bloomberg was for a 7.6 percent drop.
Basically, cows are a hot potato. Nobody wants to hold them, cause they're so darned expensive to fee d. Why pay to carry a cow, when you can get on the other side of that trade -- selling corn to the feedlots. Question is: what happens when everyone starts crowding the same trade?
Sam, a cattle rancher writes:
I find this as no surprise. What the hell do you expect them to do. This really worries me since I sell calves but there is nothing I can do about it except weather the storm. Like I've said before it wouldn't surprise me if you see cow-calf producers like me having to hold on to the calf longer and put more weight on it with grass so the feedlots don't have to put so much corn through them. I am looking at working that way in my operation. Time will tell
It's an age-old issue. Everyone wants someone else to carry the inventory for the longest period of time. The rancher wants to sell it to the feedlot, and the feedlot wants to sell it to the slaughterer. So with the damn heifers so expensive to feed, the quicker you can move them along, the better.
