Some producers who sold their calves this summer or early fall are delivering calves right alongside salebarn calves for as much as a $200 difference! It’s an interesting time – sellers aren't willing to sell significant numbers at these reduced prices, and buyers haven't been overly aggressive buyers either.
Retained ownership is on the rise and producers are warehousing calves waiting for the market to rebound. Heifers, which are selling at a steeper discount than in the past, are being kept back to either be put on feed or bred to sell as bred heifers.
The debate is simple. Are we heading lower? Or has this been an overreaction that will correct itself with just a little time?
It all boils down to the macro-economic picture. Will the credit markets find stability and consumer confidence strengthen? Or will we see a whole new wave of financial disruptions that send the country and world into a prolonged funk?
Put me in the optimist column. Yes, commodities may not have seen their lows in the very short term, but people still like to eat. Sure, we may see more hamburger being sold, and less demand for $50 steaks at a restaurant, but we have a growing population. Despite any short-term liquidity crisis, there are too many people around the world embracing capitalism to make the case that growth won't return.
This economy, which withstood the explosion in energy and commodity prices, the cost of the Iraq war and all the election-year rhetoric designed to create a feeling of malaise among voters, was still growing right up until the financial crisis. Certainly it was the tipping point in the global economy, but who can't be bullish on the world long term?
At the risk of sounding out of touch, the fundamentals of our business are very good. We’re competing for the center of the plate more effectively than ever. Global conditions will improve, and we’re regaining access to lost markets.
Americans – despite all the gloom and doom about our failures – are still the most productive and entrepreneurial. The talk that we can’t compete with South America, Australia or New Zealand on a cost-of-production basis is a false argument. Sure, our input costs (land, labor and feed) are higher, but we are without peer in size, efficiency and infrastructure.
Direct comparisons between the U.S. and other beef-exporting countries (excluding Canada) aren’t valid. If the world preferred grass-fed beef, or if we had to compete on a grass-based system, then we would be in trouble, but we don't! We’re not only competitive, but we’re the world's standard when it comes to producing high-quality, corn-fed beef.
I'm actually excited about the environmental movement and our ability to compete in a "green" economy. Anyone who spends time on a ranch understands the one fundamental truth about our business and the environment. We are the heroes of the environmental movement; we are the stewards of the ecosystems that not only provide safe, wholesome food, but maintain wildlife habitat and open space. Nobody does what we do any better.
Cattle-Fax is projecting fed prices to average in the upper $90s next year despite demand concerns. Corn and energy prices have fallen, and prospects for profitability on the feeder and stocker sides are greatly improved.
Take a moment and look at global trends, and ask yourself: “which industry would you rather be involved in right now?” I suspect it's a pretty short list.