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Calves Could Get Higher

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Well-known member
Feb 13, 2005
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Calves Could Get Higher

American News, September 02, 2005


If we stay on the same level that we are currently at in the feeder cattle markets right now, these calves coming to town in a month could get higher. Consider these points:

1. There is an incredible amount of feed out there. Cheap feed. Hay is at $40/ton or less (basically the cost of production). Last year's corn can be bought around $1.50. The heat this summer also turned lots of corn acres into silage acres. And many of us are even sitting on last year's hay, last year's silage, and last year's corn. The bottom line, is that unless we have cow herds to winter, we are going to have to buy something to feed it to, or let it rot. And by the way, corn at around $1.50 is a good buy, and I don't think given our weather conditions during this past summer it will get much cheaper than that.

2. We've lost most our fear about the Canadian border. They opened the border and weeks later an 800 lb. steer off grass still brings close to $1.20. The fat cattle market is still hanging around 80 bucks, futures closer to 90, and video sales of new crop calves are as strong as ever. Maybe the toll that the open border will take on our market is yet to come, but for now we've all but forgotten about it.

3. We've lost our fear of mad cow. Only months ago it seemed there was a mad cow around every corner, waiting to jump out and tear our heads off. Now the issue seems obsolete and irrelevant especially since the last couple of mad cow scares failed to scare. Sure, this issue could still sneak up out of the ground, much like anthrax did, and give us a run for our money. However, for the most part, "mad cow" doesn't seem to be the threat it once was to our market.

4. We've lost our fear of feeding cattle. Calves have been a good investment over the last couple of years. Look back over these last couple of years, and these calves have made some money, especially for the back grounder. Sure, very few people killed a coon by weaning and feeding these calves, but I would say almost everybody held their money together.

You put all those ingredients together and you get aggressive buyers. Buyers sitting on mountains of feed, bidding without fear of a market crash from either the open border or mad cow, and looking back over the last couple years knowing that have held their money together, and most likely have gotten to put some of it back in their pocket. And even if the market does fail, and they end up donating a bunch of feed to the cause, that wouldn't be the worse thing. As long as they can advance these cattle a ways, I think they'd be satisfied. If we stay the course, these contract and video calves could turn out to be cheap because cash sales in the sale barn circuit could be dollars higher.

However, the middle of October is still a long ways away. A lot can happen to our market in a little amount of time. Look at what impact an overnight natural disaster can not only have on the lives of millions of people, but what it can do to markets overnight. $3 diesel fuel could be hours away, and worse yet, it could stick around for weeks or even months. Speaking of diesel, I recently fueled up at a gas station where they sold bio-diesel. However, it was a nickel higher than regular fuel. Where is the incentive? With $1.50 corn, $6 beans, and $70 crude, you would think now would be the opportune time for ethanol blended gas and biodiesel to be at a significant discount to conventional fuel. You would think that with cheap grain and high crude, now would be the time for these alternative fuels to shine. You would think.
Interesting post, Haymaker.

I have been watching for the price differential between regular gas and ethanol blend and it doesn't seem to be there.

Maybe we're not selling our corn cheap enough. Maybe. As if 1960's prices wasn't cheap enough.
The ethanol manager in our area was on the radio this past week. He said they sell ethanol in 6 month allottments to the oil companies. The oil companies then have the control of the price. I always wondered why the oil companies weren'r squawking more about ethanol, but they do have the final control of it. Back to the calf prices Haymaker predicts. I wonder if the price will go down somewhat due to the cattle feeder is taking it in the shorts right now. Can't afford to lose 100 plus per head for too many turns. But you are correct in that everybody and their dog will feed a few head thinking they are getting more value from their corn only to have cheap prices at sale time. Bottom line might equal out the same.