I'm going to turn the tables this week. Usually, producers are calling or emailing me with questions. But this week I can't help wondering what livestock producers will do in the months ahead. I need a few questions answered because I don't like the answers I get when I put input costs and expenses against the rate of returns. I see super livestock contraction in the next year and I don't want to believe it.
With grain prices at or near historical highs, live cattle down almost $20/cwt. from last winter's highs, and hogs acting more and more like they did in 2009 with pigs almost being given away, what will livestock producers do? Will they simply harvest corn and sell it? Will they store it, collect whatever crop insurance is available, pay the costs to carry it and decide down the road if they want to feed it?
Will hog producers fill buildings with dirt-cheap pigs and hope hog prices rally? Will cattlemen buy expensive feeder cattle and hope cattle rally instead of falling? Will they contract feed, finish cattle and accept small, if any, profits? Can they continue to feed cattle vs. the large known profits selling grain outright and collecting payments on insurance?
Of course, cattle producers tell me over and over how they can't sleep if they can't hear cattle moving around through the pens at night and hearing the occasional bawl from a lone feeder lost from his group. But being able to sleep soundly is knowing that family and farm expenses are paid instead of hoping for profits. Selling grain, collecting on crop insurance and taking the money to the bank is also much simpler. Is it comfort of mind to feed cattle when buying high-priced feeder cattle, battling weather and hoping live cattle prices don't fall?
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