Red Robin
Well-known member
SIZING UP THE NATION'S CATTLE HERD
The January 1st inventory of cattle reflected what many already knew. The nation's herd is not in an expansion mode, but rather a mild contraction. Normal cycles run in 7 year increments and times or cycles are not normal. After a brief increase, the herd has ceased expanding and is once again in reduction mode. The state of the industry is not healthy and the culprits are one mad cow and many ethanol crazed Congressmen.
No one ever claimed politicians are rational. Ethanol production from corn, has been proven to top more natural resources than it benefits. When the nation's focus was on energy cost and gasoline, it appeared to be a quick fix. Now that food prices are rising in an uncontrollable upward spiral, consumers are suffering far worse than the few cents savings on gas.
The nation's beef producing infrastructure is built for a larger national herd. Now that numbers are declining, major segments of the production machine are struggling to accommodate the smaller numbers and getting hammered in the process. Too much beef processing capacity has seen the nation's beef packers in a sea of red ink. The trend now has forced some of the strongest to begin closing the least efficient plants.
Next the nation's feedyards, built to handle more cattle than are currently available, are bidding up feeder prices in order to maintain market share and keep the facilities full and operating efficiently. Efficiencies have their cost and high corn and low fed prices are causing close outs of fed cattle to report $100-$200/head losses. The continuation of this situation will force some closures.
The thought that cattle feeding was moving north to seek out cheap distillers grain as a replacement for high priced corn is proving a myth. Higher feeder cattle cost in the north combined with unfavorable weather and steep selling discounts [this week cattle in the north sold for $87 while in the south they sold for $90], is making cattle feeding in the north a bad proposition. Many feedyards are for sale and some will close before they sell, as cattle owners tire of losing money.
The solution is simple but unlikely. The government needs to eliminate the ethanol subsidy for corn based products. Government officials need to negotiate the elimination of trade barriers set forth after the discovery of a mad cow. Only then can the industry hope to reestablish itself and take advantage of a world that is increasingly in need of meat protein.
CHECK OUT THE MARKETS -- new market links
click on "check out the markets" to go to the market page
SEND YOUR COMMENTS to [email protected]
The January 1st inventory of cattle reflected what many already knew. The nation's herd is not in an expansion mode, but rather a mild contraction. Normal cycles run in 7 year increments and times or cycles are not normal. After a brief increase, the herd has ceased expanding and is once again in reduction mode. The state of the industry is not healthy and the culprits are one mad cow and many ethanol crazed Congressmen.
No one ever claimed politicians are rational. Ethanol production from corn, has been proven to top more natural resources than it benefits. When the nation's focus was on energy cost and gasoline, it appeared to be a quick fix. Now that food prices are rising in an uncontrollable upward spiral, consumers are suffering far worse than the few cents savings on gas.
The nation's beef producing infrastructure is built for a larger national herd. Now that numbers are declining, major segments of the production machine are struggling to accommodate the smaller numbers and getting hammered in the process. Too much beef processing capacity has seen the nation's beef packers in a sea of red ink. The trend now has forced some of the strongest to begin closing the least efficient plants.
Next the nation's feedyards, built to handle more cattle than are currently available, are bidding up feeder prices in order to maintain market share and keep the facilities full and operating efficiently. Efficiencies have their cost and high corn and low fed prices are causing close outs of fed cattle to report $100-$200/head losses. The continuation of this situation will force some closures.
The thought that cattle feeding was moving north to seek out cheap distillers grain as a replacement for high priced corn is proving a myth. Higher feeder cattle cost in the north combined with unfavorable weather and steep selling discounts [this week cattle in the north sold for $87 while in the south they sold for $90], is making cattle feeding in the north a bad proposition. Many feedyards are for sale and some will close before they sell, as cattle owners tire of losing money.
The solution is simple but unlikely. The government needs to eliminate the ethanol subsidy for corn based products. Government officials need to negotiate the elimination of trade barriers set forth after the discovery of a mad cow. Only then can the industry hope to reestablish itself and take advantage of a world that is increasingly in need of meat protein.
CHECK OUT THE MARKETS -- new market links
click on "check out the markets" to go to the market page
SEND YOUR COMMENTS to [email protected]