Tuesday, December 14, 2010

Record calf prices

I will continue to suggest that you refrain from complaining about the high price of corn. Clearly the price of corn and the price of beef are not necessarily negatively correlated. As I have stated in the past, if you would consider yourselves grass farmers instead of cattlemen, you would love to see corn prices rise. Do you think wheat growers complain about high priced corn? Soybean growers? So why would grass growers complain? The fact is, although not as closely related as wheat or beans, grass is definitely a complimentary product to corn....so that as the price of corn rises, the VALUE of grass rises as well. If grass traded on the CBOT, you can bet your last dollar that you would see the same recent rise in it's value as we have in corn, wheat and beans...it would track very closely to grain commodities. This is not to say that there would not be occasional disparities or spikes/shocks for various reasons....I am making a "general" statement. All too often, beef publications are ignorant to macro-economics and instead focus on short term issues like: well if corn prices rise by 10 cents today, it will cost me more to feed this calf to slaughter. While that statement may be true, it ignores the greater market forces that drive up the value of the grass that cattlemen are producing which in turn drives up the revenue the grass farm generates (assuming the quantity of grass harvested remains constant). So ignore what the pundits are telling you about the dangers of high priced corn. Celebrate our government's supporting of the ethanol industry and be happy for farmers that will be putting more money into their pockets this year and in years to come, because you are right behind them!

1 comment:

  1. Hey don't give those hedge-funders any ideas about commodity-trading grass.