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What will input cost do over next 24 months ?

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efb

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Just as I have worked myself into a position to expand my cowherd, I am wondering where are we headed :???:
Here are some numbers I am looking at.
last fall current percent change
cubes ( cake) $9.70/cwt $16.70 + 72%
fertilizer $386/ton $520 +34%
diesel $3.27 $4.19 +28%
grass hay $45/roll $55 +22%

This represents a major dollar increase in cost and I am wondering if it is worth it :???: Do you think these price trends are short term ? If not, can your cows cover it :???:
 
I am fairly certain diesel will increase and fertilizer will increase.

As to expanding, we all take our own chances and play with our own money!

I think we could see a shake-out of some high cost producers in the next year or two, but after a while the cattle prices should trend higher.

Nothing wrong with being patient. As Warren Buffett say's "Wait for that Fat pitch!"
 
I am not very bullish on the near term future for the cattleman. I hate to feel this way, but with the price of everything going up I'm afraid it will be a breakeven year at best for most ranchers. There's not a lot we can do about the price we receive so the only thing we can do is cut costs.

The American farmer and rancher has always known that they need to live within their means, but we have never seen times like these, in my opinion. We've seen the price of cattle fluctuate all the time, but we've never seen inputs jump like they have in the last few years.

My answer to this situation is to calve in May and June to try to reduce the amount of feed it takes to get that cow through the winter. I think I can save at least $100 per head, maybe more. Time will tell I guess. I don't like the idea of shorting cattle on mineral, like some are suggesting. Maybe I feed too much mineral, but I've seen a lot of health issues when cattle are shorted on that end. Vaccinations are another area that are pretty important that some might skimp on, but we need to be careful there too.

I'm surprised how much pairs are still bringing in the light of all this. My cousins just sold broken mouth pairs in Ft. Pierre last week for $1250. They had big ol' calves on them already, and they have really good cattle. I'm glad there is still some optimism out there.

Anyway, I've rambled on long enough. What do you guys think?
 
We are going into another trend. We may not see a drop in cattle prices this time around. It will be an increase in input costs to worry about this time. The whole economic structure in the country is changing. It is world wide. Find a way to fit in.
 
Just sell your livestock to Russia:

The United States will begin exporting breeding cattle, bovine embryos; breeding, fattening and slaughter swine; and breeding and sport horses to Russia, according to an announcement from USDA's Animal and Plant Health Inspection Service (APHIS). Russia will accept cattle born on or after implementation of the United States' 1997 ruminant-to-ruminant feed ban.

Russia is turning to the world market to import livestock and genetics to restore its livestock herd, which has been declining during the last 15 years. The value of these new markets for U.S. exporters is substantial. The new live animal protocols will allow U.S. exporters to participate in Russia's $300 million market for live animal imports, according to USDA

USDA has worked closely with Russia and other trading partners to establish full market access for U.S. livestock, USDA noted, and will continue to encourage other countries to take steps to align their requirements with international standards.
 
Big Swede, I agree on the spring calving. That is the first decision I made, to switch my fall calving cows to spring. I am hopeing that will save two rolls of hay per cow or $110 per cow, close to your $100 estimate.
 
If you have to borrow money to grow your cattle herd this isn't the time to do it with the rising inputs, Right now I am saving a few more hefiers on my own dollar to grow my herd that way if I need to sell some, yearling hefiers or bred hefiers to pay a few bills I don't have to pay the banker first.
 
It a pretty good bet that things will not get any better this year with the presidentcial elections going on. The Democrat congress will continue to do anything to make the Repubs look bad (the same would happen if circumstances were reversed). There have always been ups and downs but I fear that we may have painted ourselves into a corner this time. There are too many changes working against agriculture to reverse some trends. Packers, Wall St investors, enviornmentalists, fuel issues, and foriegn involvement have a strangle hold on our industry. It would take a major overhaul to turn things around. It appears we are headed the way of the pork and poultry industry.
 
Short term bothers me some, corn is to high for nearly any industry that uses it. But with that said, I believe high quality cattle (efficient, enough pounds per carcass, and quality carcasses) will be in a high demand. Higher than ever before. Packers can import as much average beef needed, but they will look to us for the best. I think that we will see huge premiums or discounts, however you want to say it from good cattle to average or below. The feeders are keeping records on whose cattle wrok and whose don't. They will come back and buy the cattle that work and either discount or flat ignore the cattle that don't.

Big Swede, I don't really agree that their isn't much we can do as far as prices go. Sure, we have to take what they want to give us, but we can make our individual product more pleasing to the buyer. As a service to our bull customers, we purchase alot of our bull customers calves and we can ussually give a premium for top quality, a premium for a load lot of the same weight & sex, a premium for source and aged tagged, a premium for natural, a premium for good replacement heifers, and a premium for cattle that have a good history in the feedlot and/or carcass. On average, ranchers that have a full load of the same weight/sex will receive an extra $3/cwt on steers. Over above that, just because we are bidding, on our customers cattle, they ussually get another $3/cwt on their steers and $10/cwt on their heifers. (nearly all of our customers breed straight Red Angus cows to Red Angus bulls and the heifers go as replacements.) We don't get them all bought, probably only around 25%, but we bid on all of them and all it takes is another bidder to make the difference.

Ranchers that don't have enough cattle to make a load, can and probably should co-mingle their cattle with another ranchers who has similar cattle to form a load, so they can get that $3/cwt premium. Just by doing this, you can get around an extra $1500 on a semi load of calves.

Source and aged fat cattle receive around a $25 per head premium and this does trickle back down to the producer.
 
I know what you are saying about marketing calves BRG, but those are things that a lot of producers are doing already. Topping the market may not be enough this year. I hate being so negative, it goes against my nature, but we are suddenly in a whole new world.

I remember rumors of $100 a barrel oil about a year ago and I thought yeah right, it will never get that high. With the entrance of China and India into the market for inputs that we used to have pretty much of a monopoly on, it's a new era in production costs.

Our only salvation like you say is the fact that we can also supply the new world with quality beef. As their life style improves over there, hopefully they will be able to afford a better diet, that is, our beef.

Americans are so used to having cheap food that they might now realize that groceries are more important than that new flat screen TV or that new jet ski they have had their eye on. Our priorities are all screwed up in this country. Not having disposable income for entertainment will be quite an adjustment for some.

Anyway, back to the cattle market. Do you foresee $2.00 a pound for feeders in the next 10 years? Every thing else has doubled or tripled in price recently, why shouldn't cattle? They almost need to to keep up with expenses and make a profit in the cattle business. We can't be in this thing to break even or lose equity.

I'm done, I'm depressing myself. :(
 
I like this conversation. It is a little depressing but if we can get kernels of wisdom from peoples posts in how they are dealing with or plan to deal with escalating cost then we are all better off.

To answer your question: YES we will see $2.00 feeders in less than 10 years.

Here's something I am doing. Put some money in these fertilizer company stocks. MOS and POT are good to start. Put some money in companies like EOG, KWK, and SWN. It is a form of hedging folks in AG. Own a little physical silver and gold. Own lots of "Hard Assets". That is the way to protect yourself in this inflationary environment.
 
Big Swede, your comments are all right on target. Scary as some of them may be.

I had a similar conversation with a neighbor this week and the same "$2.00" figure got kicked around.

As far as a $3.00 premium, while it is always welcome, it just ain't enough. I always got a kick out the cash croppers, even when I was one of them, who wanted just another 25 cents a bushel for their corn or beans when we needed another $1.25 a bushel to keep pace with the costs.

It seems we always set our sights too low in this business.

Another thing that has always made me cry in this business is the fact that too often that for the cattleman to make money, the grain grower has to starve. Now that the grain producers are making money for a change, we cattle guys are taking a kick in the teeth.

Why can't both do their thing and still have a bit of jingle in their pocket at the end of the day?

I guess there is no Utopia.
 
Ya I do in the next 10 years, in fact I don't think it is out of the question in the next 5 years, and I am sure we will see $1.20 fat cattle in the real near future. The world population is growing faster than ever. Everyone needs to eat.

I also think corn will come back to reality as well.
 
Interesting discussion, I'm afraid we may see $1.50 fats but feeders will probably stay close to $1.00.......IF the corn and hay prices keep climbing. Definitety a concern for those of us that are mainly cow/calf producers. Nice to have a few wheat acres to maybe take up a little slack.
 
WINNIPEG, Manitoba, May 8 (Reuters) - Potash fertilizer will be in short supply for the next five years, contrary to recent forecasts of the UN's Food and Agriculture Organization, the chief executive of Potash Corp of Saskatchewan (POT.TO: Quote, Profile, Research) said on Thursday.

Bill Doyle told shareholders at Potash Corp's annual meeting that he disagreed with a February FAO report that said production of potash and other fertilizers would outstrip demand during the next five years.

"I read that report, and what I would tell you is we think potash is going to be tight over the next five year period," said Doyle, CEO of the world's largest fertilizer producer. "We don't think there's going to be surplus supplies."

Saskatoon, Saskatchewan-based Potash Corp has rolled out expansion plans out to 2015, but Doyle said other companies have not announced any new potash mines that would significantly increase world supplies of the nutrient.

Potash Corp, which sold 9.4 million tonnes of potash last year, plans to boost capacity to 15.7 million tonnes by the end of 2012, and 17.2 million tonnes by 2015.

"Around the world, potash customers are receiving shipments on an allocation basis, as supply is too tight to provide the full volumes they have requested," Doyle said, adding the situation was unlikely to change anytime soon.

Potash is mined in only 12 countries, with the best deposits in Saskatchewan and Russia. A new mine would cost $2.8 billion and take at least five years to build, he said.

Asked about the impact of new potash exploration companies that have sprung up since prices soared, Doyle said potash is hard to find and harder to mine because it is water-soluble.

"There are a lot of promoters in this business, and you can't blame them," he said. "When you hear that it's around every street corner and under every rock, potentially, then you know that times are good in the potash business."

Potash Corp has cashed in on record grain prices which have boosted demand and prices for fertilizer, sending its New York-listed shares (POT.N: Quote, Profile, Research) up 38 percent in 2008 and more than 200 percent since 2007.

Potash shares were up C$1.50 at C$201.20 on Thursday at the Toronto Stock Exchange but down $1.35 at $197.50 in New York.

Doyle acknowledged the high-flying stock has become more volatile, creating anxiety for some shareholders.

Doyle blamed the credit crisis, which has pressured markets, as well as analysts who "flip-flop on reports from one week to the next" without a long-term view of world food shortages.

"I have said that (attention deficit disorder) is alive and well on Wall Street and Bay Street," he said. ($1=$1.02 Canadian) (Reporting by Roberta Rampton; editing by Janet Guttsman)
 
mtrancher said:
Interesting discussion, I'm afraid we may see $1.50 fats but feeders will probably stay close to $1.00.......IF the corn and hay prices keep climbing. Definitety a concern for those of us that are mainly cow/calf producers. Nice to have a few wheat acres to maybe take up a little slack.

I think alot of us should grow some crops and feed some of our own cattle.We spend alot of money here on top quality bulls and after feeding a pen of bulls on an actual ration and knowing my exact cost those cattle made a profit of over $1.00 per hd. per day.That's more than any cow/calf deal will make.I bought every bit of the feed for these cattle and it included $4.00 corn and $40 per bale hay soybean meal and mineral.I think we as cow/calf producers are leaveing alot of money on the table selling feeder calves.
 
How to Make Fertilizer Appear Out of Thin Air, Part I
By Alexis Madrigal EmailMay 07, 2008 | 1:29:46 PMCategories: Energy, Environment, Future of Fertilizer

Fertilizerfactory

Combine air and natural gas over an iron oxide catalyst under high pressure and intense heat and what do you get?

The answer, surprisingly, is plant food: ammonia, the chemical precursor to nitrogen fertilizers.

Ammonia gets converted into nitrites and nitrates, which when sprinkled onto plants, allow them to grow larger. This is the basic idea behind the huge increases in agricultural yields, doubling between 1950 and 1990, seen in the 20th century. (Caveats about the "quality" of this growth and the environmental impacts of nitrogen are noted, but left aside for a later post in this continuing series).

Back around 1915, the world produced almost no nitrogen fertilizer, largely because there was no usable nitrogen supply. Now, the world produces about 87 million tons of N-based fertilizers. This increase is primarily due to the Haber-Bosch process for pulling nitrogen out of the air. (The development of new plant varieties that are able to soak in excess nitrogen will also be the subject of a separate post).

Clearly, the Haber-Bosch process has been successful. As we've noted before, at least one professor has estimated that 40 percent of the world's food can be traced back to the process. But the process is encountering major problems in the increasingly resource-constrained world.

Here's why: the main reaction in the process is cooking N2 and H2 together at 500 degrees Celsius and 200 atmospheres of pressure. You need all that heat and pressure because breaking apart an N2 molecule turns out to be incredibly difficult. A nitrogen atom has five electrons in its outer shell (valence electrons), so it has a tendency to share three electrons with another nitrogen atom to reach its stable (octet rule) state. That's what generates dinitrogen's triple covalent bond, one of the strongest in nature. The energy required to break the bond is 946 kilojoules of energy per mole of nitrogen, or twice the energy required to bust an O2 molecule.

Luckily, or so we thought, fossil fuels were cheap, widely available, and incredibly energy dense: 1 cubic foot of natural gas contains 1.055 gigajoules of energy. That's enough energy to convert a lot of moles of nitrogen into ammonia. So, once the Haber-Bosch process established it could be done, chemists across the world began to burn a lot of natural gas to get dinitrogen to react with hydrogen. And where do we get the hydrogen? Why, we use the natural gas for that too, naturally: it is CH4 after all.

Taken together, there's a lot of natural gas going into the production of nitrogen fertilizer. So much so that when I tweeted about my fertilizer investigation, my friend Celeste LeCompte, managing editor at the Sustainable Industries Journal, tweeted back, "Think: natural gas."

In effect, we've been pumping fossil energy into our food supply, and eating it. While diminishing fossil fuel supplies and climate concerns have given us perfect hindsight into why this could be a dubious path for the future, at the time, it must have seemed like an excellent idea, given that the alternative--not producing enough food--was both real and horrific.

Until relatively recently, the price of natural gas, which tracks the price of oil very closely, was relatively low. Now, with oil over $120 a barrel and natural gas prices having doubled since the mid-90s to over $11 per thousand cubic feet of the stuff, the cost of ammonia has tripled. As in biofuels or alternative energy, the rising cost of oil is driving innovation.

As we've noted before, legumes developed symbiotic relationships with bacteria who can pull nitrogen out of the air at room temperature and standard atmospheric pressure. They use a specialized enzyme known as a nitrogenase that consists of iron and the metal molybdenum. In fact, scientists estimate that 200 million tons of nitrogen are fixed via natural processes, or more than twice human production.

Now teams of scientists across the world from Richard Schrock at MIT to David Tyler at the University of Oregon are racing to find just the right catalyst to recreate the natural nitrogen fixation process. While they wouldn't eliminate the use of natural gas as a feedstock, they would reduce the amount of energy used in the creation of ammonia. How much? Eliminating the Haber-Bosch process, which uses an estimated one percent of the world's total 15 terawatts of energy consumption (xls) would mean 150 gigawatts of energy savings for the world. That's about as much coal generating capacity as the US is planning to add between now and 2030.

In the next post in this continuing series dedicated to exploring new fertilizer technologies that could reduce their environmental impact and energy usage while increasing food security, we'll explore these scientists' biomimetic work.

Image: A fertilizer factory in the UK. flickr/Addictive Picasso
 

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