From Our Side of the Fence

Justin AngellBy JUSTIN ANGELL
EMCC Owner/Partner

John F Kennedy quotes… “We should except our diverse world as it is… “and “ we must recognize that we cannot remake the world simply by our own command….”

Along those lines – whether we like it or not – corporate buyers are becoming more and more important in the sale of our local cattle. We can view this as a terrible change from the good ol’ days or we can view this as an opportunity. In Bowling Green ,we were actually fortunate to be able to sell a high enough volume of good cattle year-round to attract several corporate as well as expanding family feeding operations.

If you have calves to sell this fall, you should consider buying and backgrounding some matching calves to make larger sale groups and loads. We can help you do this. As several local backgrounders have shown us, there is increasing demand for feed lot ready yearlings/cattle by both corporate and expanding family feedlot buyers. Like my ol’dad used to say “you got to sell ‘em when they want to buy ‘em”.

Expanding on that, we also need to sell them what they want. Phenotypically, the industry is heading towards solid color polled animals predominantly black hided. Spotted cattle, horned, show steer rejects, white nose Charolais, purebred Herefords, fine boned black cattle, etc. are going to continue to struggle to achieve any type of price parity. To be feedlot ready, our cattle either need to be true yearlings or calves that are weaned at least 60 days. Vaccinations for all cattle are critical, especially this time of year as October is known as “national drag off a dead calf month”.

I heard an interesting statistic this week. In the last three years, there has been more concrete poured in China than in the 21st century in the United States. –

Interestingly, we are finding out that maybe China is not so invincible. Apparently, much of this growth has been funded entirely with borrowed money. Evergrande is a very large company in China that is in the process of going bankrupt with $300 billion in questionable assets and debt. I’m not sure how much $300 billion is, but for one single company to have that much debt is absolutely mind-boggling. Companies that are that big with tens of thousands of employees never go down alone. They always drag other companies down with them. It will be interesting to see how much the economic slowdown in Asia will affect our beef exports to that region.

On top of a crumbling real estate market, China has for some reason developed a severe power shortage. This fuel and power shortage is not unique to China, Europe is also finding themselves with a shortage of coal, natural gas and electricity in many areas. This may be the single most important thing we talk about in this article this month.

Natural gas has also reached all-time record highs in Asia and Europe. Seems like just a year ago we had all kinds of natural gas and gasoline was over a dollar per gallon cheaper. I do not understand how we can go from an energy surplus to a worldwide energy shortage in less than a year.

The problem with the natural gas shortage is as most of you know natural gas is the base raw material for most nitrogen fertilizers. Interestingly, a byproduct of the natural gas/fertilizer production is carbon dioxide which I believe is the same product that soft drink companies and beer vendors use to pressurize their lines to produce “on tap” beer and soda at soda fountains.

Several months ago, I stated that I believe corn was going to get substantially higher after the fall harvest. This fertilizer shortage is spreading to the United States, causing increasingly higher prices – if the fertilizer is even available.

It seems unfathomable, but what happens if we do not have 100% of the nitrogen fertilizer we need next spring or what happens if it is so high it diverts corn acres to weed beans or now cotton production.

This doesn’t even begin to scratch the surface of the inflationary monetary policy of this government, so throw in a little inflation on top of that. Once again, I think the corn market stands to gain significantly within the next 2 to 6 months and will sustain those higher prices indefinitely.

Something else to consider is the absurdity of the month. Federal government is in the process of terminating all border guards who have not been vaccinated. To be clear, these border agents are not Covid positive and have probably already had Covid. The absurdity is the fact that the government would fire border patrol agents that are not vaccinated, while at the same time allowing hundreds of thousands of migrants from all over the world to walk into this country knowing that 20% are Covid positive.

The resettlement of these immigrants into the cities of this country have contributed to the outbreaks of mumps, measles, Covid, etc. in local people (American) near resettlement areas.

So, if you think about it just a little bit, there were 15,000 Haitians under that bridge in Del Rio, Texas. With the latest outbreak of African swine fever being in Haiti, what are the chances that one of those 15,000 people happen to have one little sample of that virus on their shoes or in their blankets or backpacks? That’s all it takes is one little sample landing in the right place and then poof; the swine industry in the United States dissolves…

As far as the rest of agriculture goes, it appears that harvest is going very well compared to the five-year average. Locally I think some people are a little bit disappointed with corn yields, many in that 150-170 range. Beans for the most part is going to be a disappointing crop compared to historic average yields.

I believe cattle, like all other commodities, will continue to trend higher, and someday within the next two or three years as new packing capacity comes online, the fed cattle market may actually improve significantly. This added capacity will converge with lower cattle inventory numbers. Different USDA reports all show a declining beef cow inventory in the United States. Short term I think we’re still in a world of hurt as long as the Brazilian mafia is in charge of pricing what we produce.

I’m thinking that’s enough for this month. See ya at the auction!