Wheat Ho Hum, Cattle Wow

August 2014

Hello to all our customers and friends,

 So far so good for the summer of 2014.  Rain comes a little at a time, just enough to keep the grass and crops green.  Irrigators are not running pivots at max, if at all, cutting down production expenses while expecting targeted yields.  The nasty polar vortex that caused so much bitter cold last winter has come again in July with predicted daytime highs of 80oF and nighttime lows of 50oF.  That’s more like Iowa corn growing weather than Kansas wheat harvest weather.  The unusual temperatures should conserve some moisture as compared to normal Kansas summertime temperatures of 100oF.  The wheat crop was very variable with yields of 0 to 50 bu per acre.  The wheat price dropped as the unrest with Mr. Putin in Russia cooled down or at least faded from breaking news.  If you watch the markets and current events you may have noticed the same day the Malaysian airliner was shot down (with thoughts of Russia being somewhat responsible) wheat went up to $6.49 bu on the board and has since dropped to $6.24 bu.  Even with a poor overall crop, wheat is not expected to make much of a rally in price.  In the last 30 days corn dropped over .70 cents and soybeans dropped $1.86 bu.  Locally the present cash bid for corn is $3.35 and beans are $12 per bushel. 

For those producers that have cattle operations, especially cow calf programs, the future looks very good.  In past history cow herds had 10 year cycles of feast and famine, high prices and low prices.  With the last three years of drought the cow herds have been drastically reduced in numbers.  Fewer cows mean fewer calves to proceed through the process of producing beef. The cash markets (sale barns) are selling cattle at the board price and in some cases more. This is really good for the cow-calf producer and even the cow herd owner that grows his calves to 750 or 800 lbs.  However, feeding cattle out is not profitable at this time and cannot be price protected using the board.  A 750 lb. steer at $2.15 lb. costs $1620 and would need 575# more to be marketable in December.  The December board price is $1.58/#, making a 1325# steer worth $2094.  It’s costing about $.90 to gain 1 lb. so about $518 to feed the steer to that finished weight.  The purchased feeder price of $1620 plus $518 feed costs means the animal has a total cost of $2138 and is worth $2094, losing $44 per head.  It’s a good time to own cows or as some producers refer to it as “owning the factory”. Most sources are predicting excellent calf prices into the next five years.

Until next month, Myron