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Napanee, Ontario | The point you made in #5 above was exactly the same point I made back in May of this year. Except then I was estimating $57 an acre profit.
http://talk.newagtalk.com/forums/thread-view.asp?tid=477597&mid=387...
It seems far too often, we have a bunch of guys here that just look at a chart and say - well the chart looks high, and cattle have a had a big move, so it must mean they are too high. And hence, a crash is "always just around the corner".
No one ever seems to want to look at the fundamentals. We are long on chartists, and price watchers, and short on folks who actually want to break this down, and look at WHY we are where we are in the cattle market today. Instead folks want to throw out the "cattle are just like $8 corn" comments, cause they look at a chart and think - "well that's just too high".
So I commend you on taking the effort to look a little deeper.
It does all come back to the land. It comes back to the reasons of why we have low cow numbers in the first place. It's because people saw a more profitable enterprise running rubber and steel, instead of hooves, over the ground. So the land use got changed accordingly. It didn't start in 2012 with the drought, and forced cow sales that helped kick start this run. It has been going this way for many years. And it needs to. It is market action at work - people choose the most profitable ventures over time.
And here we are today - even after this move in cattle we've witnessed, and as you illustrate cattle are STILL at a comparative disadvantage.
People make the argument that cattle don't compete with crop ground. Well I'd like those people to come to Ontario, and see all the ground that used to be pasture, used to be hay ground, used to have fence rows... Planted end to end in beans and crops.
It's the same decision that Farmers in South America will face. It is a worldwide commodity market. If crops can still out compete cattle for land up here, they can out-compete cattle for land down there. Farmers there will face the same decision on whether to put cattle on ground there instead of beans. And until prices get high enough to compensate the farmer for labor, time and inputs expenses of choosing cows, it doesn't matter if the land is $300, $3,000, or $30,000 if crops out profit a cow for that same acre.
I do recognize the tight spot that feeders are in. Are calves to high, or are fats to low? I DO know that if calf prices go back down to where they we before, everything we just discussed in terms of land use, is only going to get worse. If cattle can barely compete now, how will there be any expansion if prices crater? That unbalanced competition of the past is why cow numbers are low. They lost the decision in producers mind as to what to use their land for. Prices are high now because this is how a market works. Supply is low, and the market is trying to entice more production. We are short calves in the global beef complex.
Thanks again for your Post Shadow. I always look forward to reading your thoughts on these matters. It is a historic time indeed.
Edited by OldMcdonald 10/10/2014 10:54
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Cattle making history and is in "Catch 22"......................
