I am hearing major frustration from some of the younger cow calf producers regarding the difficulty of trying to expand their cow herd in this crazy market. Prices for pairs has shot higher at the same time when banks may be less than eager to lend to the cattle industry. Add on top of that possibly dad saying, “hey lets cash out, these prices are unbelieveable.”
Unfortunately when prices are poor expansion takes real guts and when prices turn quickly it feels like you are constantly chasing the top of the market. When cow calf pairs were $1700 people said this is crazy, well now they are pulling there hair out. Now that some pairs have traded above $2300 one has to wonder what is a good decision anymore.
In my discussions with Brian Perillat, Canfax he told me,
“these are big decisions, access to grass and credit are also a factor. From the cow calf side, paying these prices for cows requires five years of very good prices to make them work. If you can get pairs for $1800, and look at the $900 calf plus the salvageable value of the cow at $900 it be could be doable. For example in this scenario, if the bred cow market in the fall is $1500, you will make money on the $1800 – $2000 pair purchase this spring. The supply numbers have shrunk so far, the price has been bound to swing higher. However you look at it, its a lot of money invested.
The other issue facing producers is that why not keep selling off the herd when prices are this high. I have heard from two producers that said to me, “why the hell would I retain a heifer with the prices that feeder cattle will go for this fall? My banker is encouraging me to pay off some debt.”
Hard to argue with that if you are not that enamoured with the ranching business long term but for some this is when you buck up and start retaining heifers or step out on some expensive pairs to begin to expand the cow calf operation. This is going to be a very intersting fall.
