Wheat Cutting Season - July, 2014
Hello to all our customers and friends,
We’ve continued to receive moisture making the wheat fields green up, but not likely improving yields. It’s been nice to worry about storms, rain, wind and hail instead of drought and heat. The wheat price has leveled off around the plant price of last fall in the $7/bu range. Early reports are in the 10bu /acre range and I had one report of 40bu. Early reports are usually from the worst fields so maybe it will get better. There seems to be a lot of yield potential variations depending upon what cloud burst may have occurred in a specific location. Reports of average estimates of yield being released are so distorting. We’ll be able to see what the real yields are when the cutting is over and tallies are in. At this point they are not accounting for the fields (acres) that were abandoned 60 to 90 days ago before the crop tours.
The cattle market has been raging upward and may have topped out June 24th when October feeder cattle hit $2.14/lb. on the board. These are prices no one expected to be attained. Fat cattle markets have started to climb with multiple months posting over the $1.50/lb. mark. If the fats continue to climb then who knows how high the feeder cattle can escalate to. There is a point at which the final product in the meat counter will stop moving in favor of pork or chicken. With faltering corn prices, hogs and chickens can be produced more quickly and efficiently. By consuming cheap grain and converting grain to meat more efficiently, they may overcome the roughage advantage cattle have. The livestock costs of production tie right in with what we are seeing in the crop production side of agriculture. Just because a farm has lots of equity in paid land, the situation does not necessarily make it a good idea to try to produce the highest yields attainable. Throwing every possible yield enhancing technology at a crop and tying up five dollars per bushel in cost of production to turn around and sell $4/bu corn will not make money, and getting a bigger truck to haul it will not help. The same scenario comes into play with the equity in the land appreciation. A farm operation could borrow more money than the cash flow can pay back, and this is an ugly trap. There is a point of diminishing returns at which costs out run yield and returns. The extra money spent on production enhancement should probably be used to diminish marketing risk instead. The same can be now said for the cattle market. With historic high in feeder cattle markets placing a floor under this year’s calf sales cannot be too irresponsible. After all, mad cow and foot and mouth disease still exists as does several other health and political liabilities that could crush our cattle markets overnight. Until next month. Myron