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Why Canada and Mexico may become BRICS nations

If they do join up, things could get very interesting for U.S. producers and packers.

Doug Ferguson

April 7, 2023

5 Min Read
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This week, I heard something on a podcast that I haven’t been able to get out of my head.  The host said that the US Dollar is now the world’s longest lasting fiat currency in history.  I had a hard time believing that and Google backed my suspicion.  According to Google there is another that has lasted longer and is still going.  Thing is, not many people actually use it, so in global context it probably doesn’t count.

According to Google, the Dollar has lasted much longer than the average duration of fiat currencies.  Most of my adult life, I have been hearing the end of the Dollar is near.  I used to believe that, then decades go by and nothing happened, and the normalcy began to take over.  Then came the news that our close trading partners of Japan and Mexico are expressing interest in joining the BRICS nations.

Some people may not know this, in order to own/buy oil, countries have to pay for, or trade it, in U.S. Dollars.  To do business, every country has had to buy these dollars.  This is why Japan and Mexico expressing interest in the BRICS is a big deal.  Those countries plan to keep a ledger of some sort to keep track of what each country contributes so everything remains balanced, and it will be backed by commodities and consumer goods.  This means all those dollars will come home.

I have written on here before that one of the reasons I am big on owning cattle is that the government can’t print cattle. The U.S. Fed is the only place U.S. Dollars can be created out of thin air.  They give it a fancy name like Quantitative Easing.  In any other setting, it is called counterfeiting.  What the U.S. Fed has basically done to us and other countries by doing this is to silently siphon wealth away from us all.  This is what the BRICS nations are trying to get away from

Here is where I personally will get some great satisfaction.  All those smart people that tell us we need trade to be profitable in this business will be completely lost.  One would think 2004 proved them wrong, but they have been allowed to continue beating that drum.  Everything they think they know is based off of fake money and credit.

This is where things will get fun.  That kind of hyperinflation will confuse most people.  The price of things will fluctuate greatly.  All that means to a sell/buy marketer is opportunity.  That kind of violent volatility will create some monstrous price relationship changes.  We are the ones who will be able to navigate the change.  If there is some sort of currency change, understanding the math and being sure the ratio of dollars to pounds is in our favor will be magnified.

I will admit all this global currency talk is out of my lane.  Here is why I bring it up, if we are going to be in the cattle business, we are also in the money business.  That is why we need to be aware of these things.  There is nothing we can do about things on a global level, but there is plenty we can do on a personal level as far as what we have in our inventory as it relates to cattle, money and feed.

I have told myself I would never wade into this next topic on this blog, but it seems to fit.  People have urged me to write about breaking up the packer monopoly.  I have experienced the collusion first hand with some cattle I have had in custom finishing yards, and I certainly have my opinions about it, and they are much the same as other people’s.  I do have one that is greatly different though.  I do not believe that the government has any interest in breaking up the monopoly.  All our representatives do is offer lip service that constituents what to hear. 

The reason I used to believe that the government won’t break up the monopoly is because it is easier to seize a handful of companies than it is to seize hundreds or even thousands if we take it to the producer level. 

This week, my thoughts wandered somewhere different upon hearing the financial news I mentioned above.  Some of our packers are owned by companies from the BRICS nations.  Our government may not even have the power to break them up anymore.  The blowback may be catastrophic to even legitimately try.  When we accurately identify the problem, the solution becomes clear.  The problem is, there is a huge gap between clear and easy.

These things will take time before they manifest, so betting on the come is off the table because the cattle in inventory today will reach the terminus before we have solutions.  This is why, I repeat, marketing cattle in a real time cash flow reckoning that allows us to see the profitable relationships right now, because that is where our only control is.

Cattle prices continue to climb higher.  This is a good thing for those who do not do sell/buy marketing, as it will bail them out of their position.  The cattlemen with market literacy are also feeling good when they examine the price relationships.  The Value of Gain is clear, this is a weight gain business.  The boost fats got this week makes the fat to feeder trade even more attractive.

This week, feeder bulls were up to 30 back and unweaned calves up to 15 back.

On the breeding stock side of the business, pairs sold above their Intrinsic Value.  Bred females sold below their IV.  The average price dropped $100 per year of age, with heifer pairs being the highest priced.  Replacement heifers are catching roughly a $5 premium.  When we examine the relationships between open heifers, bred heifers, and heifer pairs the market is clearly signaling that it is cheaper to buy bred heifers or heifer pairs than it is to make open heifers into breds or pairs.

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