Supply and Demand

For the most part, cattle prices go up and down as a result of supply and demand.   When demand exceeds supply, prices go up – as they did in 2015.   Cow-calf producers were selling 500-pound calves for an unbelievable $1500 per head.   I don’t know of anyone who thought they would ever see calf prices so high.  

We were living the dream – until supply exceeded demand – causing prices to start falling.   Prices have been falling since early 2016.   All of the projections I have seen, including the one below, indicate supply will continue to increase through 2018 and beyond.   That will, more than likely, cause cattle prices to continue to fall.

The shortest bar on the bar graph below represents beef production in 2015 when prices were so high.   The next bar to the right represents beef production for 2016 – followed by 2017 and 2018.   The projected beef production for 2018 is above the previous high in 2002.   Are you prepared to take 2002 prices for your calves?   That would be just a little over half what they are worth today.

To make matters worse… as cattle prices go down, the cost of production continues to go up.   The cost of producing a calf more than doubled between 2000 and 2014.   Without proper management, this is the makings of a BIG financial wreck.   What is your management strategy?   What kind of management decisions should you be making to avert this wreck?

You do have choices.   You can continue to follow the status quo herd of high-input, unprofitable agriculture – or you can break away from the status quo herd-mentality way of thinking.   You can continue to purchase status quo, high-maintenance bulls that will decrease your profit per acre – or you can purchase ultra-low-maintenance PCC Solar bulls that will increase your profit per acre.   Stocking rate affects profitability, or lack thereof, more than anything else.

The future belongs to those who are able to successfully transition to a low-input (high-profit) program with efficient, low-maintenance cows.   If you have not already made this transition, NOW is the best time to get started.   WHY WAIT?   Your kids and grandkids are hoping you make the right decisions – sooner rather than later.

 

Quote Worth Re-Quoting –

“It is our choices… that show what we truly are, far more than our abilities.”   ~ J. K. Rowling

7 responses to “Supply and Demand

  1. I have never seen 3 and 4 frame calves docked at the sale bar, They are NOT as small as you probably think they are. Calves that weigh less bring more per pound than heavier calves. Low-maintenance, 3 and 4 frame cows will ALWAYS wean more total pounds because your ranch can support more of those cows — often 30% more. The calves out of 3 and 4 frame cows will usually weigh less (individually) than calves out of 5 to 7 frame cows. Therefore, they will be worth more per pound. More total pounds that are worth more per pond is a no-brainer.

  2. Kit,
    What happens to these 3/4 frame calves after they leave the auction barn and are started on a “non-grass” diet that will not produce the weight of the grain fed 5/7 framers?
    I believe the grass-fed/organic market is willing to pay more per pound.

  3. In reply to the question abut feed lot gain; high starch diets are inflammatory to the gut whether cow horse pig or human. Calves or young cattle fed starch concentrates actually have a feedlot disadvantage physiologically speaking because some damage to the microflora environment of the gut was done while still the calf was in a rapid growth stage. Starting yearling calves at a pound or 2 a day with all of the forage they can eat buffers the effect of the starch and gets the animal used to eating a concentrated starch. I don’t recommend feeding much if any grain to replacement heifers as it may reduce their efficiency as a cow.

  4. Kit,
    With the demand rising due to beef to China and the changes with NAFTA countries, do you still see the prices falling as far as 2002? I completely agree with your philosophy that is why I have a Lim-Angus bull over smaller angus cows. It is your genetics that impress me because of fly resistance and the weight gain on average grass. I always do better than market average but it seems I can never capitalize on the smaller calf philosophy especially with the spikes due to trade talks and projections. My cows and calves get 2 pounds of 14% protein supplements a day which cuts hard into my profit margin. Although our philosophy of smaller cows/calves is sound, I have not seen it as a silver bullet to be profitable.

    1. No… I don’t think prices will go as low as they were in 2002. However, I do think prices will continue to go lower. Since most cattlemen are losing money now, this will not be good for members of the status quo herd with high-maintenance cows.

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