Food Bankruptcies- Will These Include Cattle Industry?

[Anonymous]

Locally in my small town I've seen two livestock supply/feed stores closed or bankrupt...Also in talking with some ranchers that are borderline making it- or just starting/building their ranchs- that count heavily on operating notes- that the banks aren't being very generous with the money now- and that with the high cost of fuel/feed/trucking/grazing leases/etc., they may not be able to make it if the current contract offers for calf prices hold up as the fall prices...And no one up here is writing contracts ( and putting up the down money) like in years past....

I've heard for sometime the complaints of the feedlots- that claim they were losing lots...And are also the ones that operate on a lot of borrowed money...What will be the effect there?

And this domino effect talked of here- some of these local business closings already have shown to raise local costs?

Also what will be the effect to beef demand and to the amount of beef being sold- or will that be one of the things consumers cut out as belts tighten to just cover costs :???:

Tsunami of Retail Bankruptcies Looms

Weak consumer spending and tighter credit markets is creating a widening tsunami of bankruptcies in American retailing.

Not only are mid-size chains shutting down, but larger national businesses are too.

"Companies are contracting and collapsing," Burt Flickinger, managing director of retail consulting firm Strategic Resource Group, told CBS News.

"Consumers are cash- and credit-constrained. They're out of purchasing power…You'll see it in food and drug, discount and department stores, as well as specialty stores and dollar stores. Every major form of retailing."

That doesn't surprise bankruptcy experts like Rick Cieri, a bankruptcy lawyer at Kirkland & Ellis.

Money was so easy for so long that companies that should have failed were kept alive, said Cieri.

Cieri told Bloomberg that bankruptcies will include businesses "with severe operational problems" and too much debt.

The amount of distressed corporate bonds increased to $206 billion in April from $4.4 billion in March 2007. They now yield at least 10 percentage points more than Treasuries, according to Merrill Lynch.

The share of leveraged loans considered distressed was 16 percent at the end of March, the highest since 1997, the S&P said.

Flickinger predicts a "record number of bankruptcies over the next 50, 100, and 1,000 days."

His forecast came just days after Sharper Image Corp. and Lillian Vernon Corp. both filed for bankruptcy, citing declining sales.

The two companies joined other firms that filed for bankruptcy earlier, such as Levitz Furniture, home furnishings retailer Fortunoff, and electronics retailer Tweeter Home Entertainment Group.

In fact, since last fall, eight mostly mid-size chains have filed for bankruptcy protection, and the International Council of Shopping Centers projects 2008 store closings could reach 5,770 stores in the U.S. — the largest number of closings since 2004.

Even retailers that don't have to file for bankruptcy are doing so just to preserve cash through what many experts have predicted could be a long economic downturn.

According to The New York Times, over the next year Foot Locker said it intends to close 140 stores, Ann Taylor will close 117, and jeweler Zales will shut 100.

But consumer spending isn't the whole problem.

Retailers typically depend heavily on borrowed money to finance their purchases of merchandise and cover routine expenses like payrolls. Since banks are struggling with a mortgage crisis and their own potential write-offs, they've pulled back on extending new loans to retailers.

What's more, some lenders have second and even third liens on a company's assets, reports CBS.

Then there's the domino effect.

Retailers rely on a broad network of suppliers. Bankruptcies leave behind millions of dollars in unpaid bills to shipping companies, furniture manufacturers, mall owners, and advertising agencies.

For example, according to the New York Times, Sharper Image owed nearly $7 million to UPS, and Levitz owed Sealy $1.4 million.

 

[per]

Not a good sign OT. Kinda makes you think about your Depression/Recession post.

 

[MoGal]

Well, if we had a reliable crystal ball that would be a big help.....

For those that have land that can grow crops, yes I think you'll see herd sellouts (I'm sure there will be some bankruptcies). Seems like in this area, many are selling out and switching over to hay but mostly grain crops. I blame imported beef for much of that (depressing cattle markets in addition to high grain costs). Paducah, KY tv station had on last friday that beef prices in the grocery store had increased 50% over last year...... and what kind of increase have we seen for beef producers???

Its kind of a vicious circle, reduced consumer spending, more layoffs, and it hasn't seemed to occur to Washington that folks need jobs with livable wages in order to spend as we've spun ourselves into debt spending. Consumers went into debt to spend and we're a service economy alright. I think you'll see lots of bankruptcies, not only businesses but personal ones as well. There's a dairy farm over by the hubby's homeplace that has bought about 500 acres in the last couple of years for 3000-3500 an acre........ what are they gonna do when property prices go down 30-50% in the next few years (housing won't bottom until 2012, however I understand banks have 100 days to get their off balances marked to market as Basel II accounting will take effect then, but I've also seen the IMF gave them until NOv. 15th so look out for a bunch of June and/or Oct. writedowns. Commodities will rise even higher especially with speculators driving it up and the Japanese carry trade has started again (they give out 1/2% loans to large corporations who invest in commodities and cause it to go even higher).

We're in a mess to say the least and who knows how it will end up.
Got disconnected b4 I could hit response, but moneynews.com has got all kinds of negative news today.

 

[cutterone]

Well in just our neighborhood I know of 2 hog operations that have torn down their buildings, 1 who tore down his farrowing building, & 1 operation just setting empty. Two restrurants have closed locally. A refrigerator plant near Indy is closing and a new Cabaleas store has postponed building a store.
Corn is $13/100, oats $25/100, and stores like TSC & Rural King are now selling feed in 40lb bags for the same price that was for 50lbs and it's high.
I heard of one cattle sale and I attended another and open cows were selling for 30-35/cwt and calves for $70's to $80's.
We went to a hay sale last weekend and I've never seen anything like it! People(many horse owners) were almost in fistfights over bidding on hay. Grass hay, and not very good was selling for over $6 and alfalfa for $7.50 +. We have called everyone we know about hay and everyone is out of roundbales. We ran out today and turned out two groups an pasture that really isn't ready.
We are at least 3-4 weeks behind in planting and just a few are starting. Gas is $3.49 and diesel $4.29 and climbing to maybe gas $4 by Memorial Day. We can't get a farm bill passed and we've all these canidates running wild all over this state.
Yep - I'd say food is going to get real scarce.

 

[Anonymous]

Not a good sign OT. Kinda makes you think about your Depression/Recession post.

Yep-- I was hoping that all commodities would do well during this recession- at least keep pace to the inflationary costs- but so far the cattle prices/futures have not been doing it....Wall Street prognosticators are still bullish on commodities- but it just isn't showing up yet in beef...

Don't know what is happening in Canada- but I sure am hearing a lot about hayland/prairie being broke up to be seeded to grains down here- which could make hay cost even more....We're not breaking up anything- but are seeding all the cropland to wheat...

Definitely a time when a guy doesn't want to need to depend on a lot of financing- and I think we're only seeing the tip of the iceberg so far as it sounds like a lot more major banks are in shakey conditions...

 

[per]

The next door neighbor broke up his hay land last week before the snow. I'm not changing anything either this year but have given it some thought. High commodity prices bring on high input costs and the grain land won't take too big of a hiccup to be be a wreck as well. The next few years will be interesting to say the least.

 

[Anonymous]

Record corn prices affect calf purchases


By Bloomberg AP and Staff Reports
4/20/2008


WASHINGTON (Bloomberg) — 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.

Corn averaged $5.20 a bushel in the first quarter, up 28 percent from a year ago, and reached a record $6.23 Thursday.

"Corn costs are too high to encourage buying after feedlots were losing $150 to $190" per animal last month, said Ron Plain, an economist at the University of Missouri is Columbia. "We expect to see liquidation in the cattle industry for a second straight year."
http://www.tulsaworld.com/business/article.aspx?articleID=20080420_5_E2_spanc32863

 

[Manitoba_Rancher]

Yes OT I can sure agree with you on that. Guys up here are ripping up pasture (that should never be broken up because its such poor land) to seed this spring. We jsut seen three quarters of pasture ripped up on the weekend. Its sad to see all thiks grass land getting broken up and hayland disappearing jsut as fast. Some round bales up here right now are $60-$70 a bale. How do you make that pay with .70 per lb hiefer calves? You cant! And with less hay acres this spring it will make hay even higher. We are seeding 120 acres of corn silage this spring so we can maybe take advantage of the hay price and sell some this fall. Makes more sense to leave it in hay and maybe make a profit without the high inputs. Last we checked Phosphate was $1200 a tonne!