Life's lessons come with a cost

Jun 15, 2012

The first big video sales are getting underway; Superior Livestock Auction held their first two-day sale in Des Moines, IA, last week and it was a good one. Buying feeder cattle this summer is going to take nerves of steel. It appears the heavy cattle will be selling for big money. The 700-pound yearlings could be trading at $175. The November futures are showing cattle at $161.80. And light calves are selling for $225. The way this market’s looking, it’s a realistic thought those prices will be ahead of us.

On the other side of the equation is feed costs. A lot of crop market analysts have been awfully bullish on feed costs and early season talk included US- DA suggesting that we could see around 95 million bushels of corn planted and produce a new crop of 14.79 million bushels of corn. Many corn farmers were getting ahead of the curve, planting early, and looking for a big crop of corn. If USDA’s recent predictions are close to right, we would have a national crop that would choke a horse.

Now that we’re well in to spring, we’ve got one thing missing in most parts of the country and that is rain. Some places have had decent moisture but most cow/calf guys who put up hay are already getting a little nervous. We’re a little short of rain and irrigation water is coming off the mountains pretty fast. The huge corn crop that many market analysts were anticipating may be starting to fall apart, albeit it’s only June 14. But it’s time for cow/calf guys to get their spring moisture and get some spring and summer grass going.

The Colorado Cattlemen’s Association and Colorado Livestock Association held their first joint meeting last week and it appeared the big thought on everyone’s mind was rain. We had a good hail storm move through the country last week which did some major damage in some areas, dropping the wrong kind of moisture, but it seems to happen somewhere every year.

Several cattlemen who raise wheat were a bit concerned and were talking about 15-20 bushel dry land wheat crops. This may be worth running calves on and forgetting about a harvest. I don’t really know what you could do with calves grazing out on thin wheat grass vs. putting that wheat in the bin at about $5 a bushel vs. a dollar-plus on graze out. It’s not arithmetic I would generally run but I would sure want to figure it out over the next few weeks.

Looking forward, I have to wonder how the futures market would treat these cattle feeders. Fed cattle contracts don’t look too good until October, but if we do get the kind of corn crop some analysts are talking about, feeders may be in good shape going into the fourth quarter. And feeder cattle contracts are looking very good for the yearling guys.

Looking through fall, things look reasonably good. But as we all know, that’s right now and these markets have a bad habit of changing fairly quickly, especially on the grains. I would still be a cautious player at these levels.

But then again, folks got to eat and I have no idea what this election year is going to mean for food and fuel prices. Meat prices have advanced going into summer and fuel prices have declined. But with commodity markets going a little wild lately, it makes me wonder if even the politicians can have any influence in these vital consumer goods markets.

I think Romney might have an idea how commodity markets work, but I’m fairly sure that President Obama doesn’t. One thing I’m certain of is that the general population has no idea how commodity markets work unless they have some of their own money in the game. It’s been the only way I’ve ever understood commodities markets. And one thing I’ve learned over the years is whatever you want to learn about, it’s going to cost you some kind of tuition.

In one way or another, you have to pay for just about any lesson you learn. I’m pretty sure Obama skipped out on some of life’s educational tuition opportunities, including economics 101.

He recently commented on the fact that the private sector is doing fine, but the public sector of the economy is not doing so well. I suppose if the public sector of the economy ever produced anything other than a problem, he may have something. But, in my short life, I have learned that if you want a strong social policy in politics, you can’t do it without a strong fiscal policy. And that is what seems to be our problem in this country. We have no sound fiscal policy. — PETE CROW