I’ve been doing a bit of “ciphering” lately on cattle economics and I found some irregularities. Here are some of the head-scratchers I ran across:
1.) In 1991 a 600 lb. black baldy steer would buy three acres of Buffalo County pasture ground. Now it takes three of those exact same steers to buy just one acre.
2.) It only takes one pound of second cutting alfalfa to buy one pound of “cake” cattle feed… You know, the stuff they sprinkle on the ground out west. That is really weird.
3.) Given average rainfall it takes $2 to $3 per pair per day to stock cows given present rental rates. For that to make sense the price of beef at the retail level will require a rare and uniquely high income level on behalf of the consumer.
4.) It really doesn’t have to rain much for the next five years. OK, I will rephrase that, it does HAVE to rain for producers to make money, but Mother Nature doesn’t HAVE to do anything.
5.) The oceans appear to be cooling, the CO2 levels in the oceans seem to be dropping as solar levels drop, and less evaporation from the surface of the oceans is the net result. Hence it likely is not going to rain very much for a few years. When it does, it will come as a deluge.
6.) As a result of number five above, we are unlikely to have green grass last past July 1 next year. This means planning on an aggressive “cake” program or massive herd liquidation. My bet is that herd reduction or all out dispersal is the route most ranchers wind up taking. The small herds will go forever because once you drop below 70 head, it becomes a hassle to justify calving, etc.
7.) With the cows hitting market as hard as I expect next spring, packers will have a bit of supply… For awhile. I just hope my friends have their freezers stocked when that phase is over.
8.) In 2002, it took 25 barrels of crude oil to buy one weaning-weight steer. Through most of history it took between 20 and 30 barrels of oil to buy a 600 lb. angus steer calf.
9.) It almost always took two ounces of gold to buy a 600 lb. black calf fresh off its mama. I’m not talking the past 10 years… I’m talking the past 200 years. It’s natural because the relative price of “things” doesn’t change as much as does the money supply.
10.) Due to all the factors above, I would not be surprised to see $2,500 feeder calves in a few years, with the producer still operating under pressure to control costs. Then again, nothing surprises me anymore.