Wednesday, January 26, 2011

Got Milk? Must have had Corn

This is one of the better commentaries on being frugal and self-sufficient I have seen in quite some time.

Is that hysterical, or what?

--------------------------------

Livestock feed costs might drive down meat costs in the near term... look out later.

My old desk partner when I was with Bear Stearns sent me this article a few minutes ago:


By Tony C. Dreibus
     Jan. 26 (Bloomberg) -- Milk may jump 22 percent by June as
higher feed costs drive producers to slaughter dairy cows, said
Shawn Hackett, president of Hackett Financial Advisors, who
correctly forecast in October that prices would advance.
     The 80 percent gain in corn and 31 percent advance in
soymeal in a year increased feed costs and outpaced the 13
percent advance in milk prices. U.S. cattle slaughter rose 6
percent in December from a year earlier, in part because dairy
farmers sent more cows to meatpacking plants, Hackett said.
     “When you look at the price of milk in the U.S. and what
it costs to produce, dairy farmers are not making a profit,”
said Hackett, forecasting $20 per 100 pounds in the next four
months. “The producer has gotten into a situation where he’s
leveraged as much as possible. Banks won’t lend any more. If
prices remain uneconomical, he will no longer be able to draw
loans with the hope that prices will eventually rebound.”
     Dairy farmers have missed out on the booming U.S. farm
economy as higher feed costs and surplus production cut profit.
Producers expanded herds following the jump in milk prices to a
record in 2007, just before the U.S. began its longest recession
since before World War II and unemployment rose to the highest
level in a quarter century.
     Hackett, who called milk an “amazing buying opportunity”
in October, said rising milk futures will mean higher prices at
grocery stores. Dairy farmers have borrowed as much money as
banks will allow and, because of rising input costs, are being
forced to sell their animals to slaughterhouses, said Hackett,
from Boynton Beach, Florida.

                       Liquidate Positions

     Milk for February delivery gained 11 cents to $16.41 per
100 pounds on the Chicago Mercantile Exchange at 10:16 a.m. The
price has increased 24 percent this month. It may decline in
February as investors liquidate positions to capitalize on gains
before resuming its rally, Hackett said.
     U.S. cattle slaughter in December totaled 2.92 million
head, the Department of Agriculture said on Jan. 21, up 6
percent from a year earlier. Red-meat output in the U.S. touched
4.36 billion pounds, the second-straight month production
reached a record, USDA data show. Beef output rose to 2.27
billion pounds, also up 6 percent year-on-year, the government
said.
     “Culling is extremely high for this time of the year,”
Hackett said. Reductions in the herd “really started in
December. That’s when dairy farmers realized they were in deep
trouble. They know that they can raise capital by selling their
herds so they’ve been doing that because they have no other
option.”

-----------------------------------

Milk consumption is half of what it was, per capita, back in the 1960's.  Why? Who knows. Yuppie/New Age marketing?  Considering how fat American kids are maybe Milk should be on the table and not gatorade/whatever.

Unlike hogs and chickens, it takes a long time to bring a cattle herd back.  And the poultry and hog markets are under pressure from feed costs, too.  These markets are also losing the interest of capital.  There are no actions without unintended consequences.

26 comments:

PioneerPreppy said...

My bet is milk consumption is just as high percentage-wise for the Americans of European ancestry as it ever was.

Greg T. Jeffers said...

I did not think of that...

Greg T. Jeffers said...

PP:

We both got this wrong... TOTAL milk sales have collapsed in spite of a rising population....

http://future.aae.wisc.edu/data/annual_values/by_area/2124?tab=sales

How crazy is that? Of course, correlation does not imply causation, but I would think that the obesity slope and the milk consumption slope would appear to be 100% uncorrelated... and that would be worth studying (but not by me)...

PioneerPreppy said...

Greg

Interesting chart there. I wonder why total sales are down? And that is quite the drop to. I know it was the "In" fad for everyone and their mother to declare themselves lactose intolerant for a while and milk was taking some health hits.

Maybe regulations have made it impossible to farm dairy. My neighbor finally gave up his smallish dairy herd a few years ago because he said it was impossible now adays.

bureaucrat said...

It is 2008 all over again. Back then I thought the world was coming to an end with ever-rising prices. I built shelves in the basement to store as much food and supplies as I could before the prices went to the moon.

We then discovered the cheap money was a head-fake. Low interest rates were facilitating increased borrowing to bid up commodities of all kinds (including and especially oil), which inevitably crashed when everyone figured out there was no shortage of anything .. including oil. Just a shortage of experience.

Fast forward to today. Same thing all over again. Cheap money to borrow to invest in commodities, stocks, everything. Commodities and stocks all jumping up. No shortages reported of anything since we STILL have massive overcapacity of everything.

So, this time we wont get fooled again. No stocking up for me (unless it is paper products like paper towels with no expiration.)

Food is made of water and water evaporates. It spoils fast.

Just sit and wait for a REAL shortage to happen (in oil).

Isn't learning about the economy fun? :)

PioneerPreppy said...

What kind of idiotic food supplies did you purchase in 2008 that are not still completely edible Bur?

Even basic canned food has a minimum shelf life of three years or more.

Unless you bought powdered milk I just can't think of anything that shouldn't be viable and saving you a ton of money today.

Anonymous said...

Found the missing sales, it’s in lowfat milk or as my son likes to call it diet milk.

http://future.aae.wisc.edu/data/annual_values/by_area/2131?tab=sales

Best,
Dan

Anonymous said...

Bur,

Removing the water from food slows spoilage! It has been a means of food preservation for millennia.

Best,
Dan

PioneerPreppy said...

So basically whole milk sales decline but the colored water they call 2%, lowfat, 1% ect. have risen?

Is there not a chart for overall?

So maybe my theory is still viable?

kathy said...

With a freezer full of chicken and pork, a root cellar full of beets, potatoes, carrots, apples, onions,garlic, turnips and hard cider, a cellar full of home made dandelion, grape and goldenrod wine and a storage room full of home canned spaghetti sauce, applesauce, pickles and jams as well as a cabinet filled with dehydrated fruits,herbs, vegetables and mushrooms I rarely go to the market. When I do, the price rise is noticable in a way that might escape me if I went each week. With laying birds and my neighbors cows, I don't buy milk or eggs either but the last time I checked milk prices they had gone from $4.49 tp $5.69 a gallon at our little country store. That prices a lot of families out of the ability to purchase much. I wonder about the consumption of powdered milk. Has that gone up? Love the link, Greg. I just printed it out. I also salivated over your pictures. I'm a Northeast girl but I must admit that, as I look out at snow that reaches half-way up my living room window, the south has its benefits, We have another snow day here, not because we had so much fall last night but because our small towns are not paying the overtime to get the roads plowed in time for the buses to get out.

Greg T. Jeffers said...

Dan:

There has got to be data out there for ALL dairy produced at the teet.

Bill said...

That article was great. Reminded me of growing up. We did all the stuff we did because it provided for our needs.

Right now we don't have to do this stuff but we are because we enjoy it, it's cheaper, and we think our kids need to learn it just like we did. Might come in handy.

confederate miner said...

Found an interesting ratio. Milk/feed.
price of milk per cwt/price of corn/56 x50 + po soybeans/60 x8 + po ton of hay/2000 x41
A ratio of 3 or more is supposed to be profitable to produce milk.

Greg T. Jeffers said...

I hear you on winter... Send me some Spring and Summer pics of your farm and I will put them up. Anything to get thru winter!

bureaucrat said...

We also had this conversation in 2008 as well as 2011, it appears. :)

You can store paper products likely forever (paper towels, toilet paper, tissues, etc.)

The only food products you can store almost forever is white rice, white sugar and honey that has no water in it (that's the research I found).

Everything else, even if you freeze it (and this includes meat) lasts 6 months to 3 years tops, or it risks spoilage.

In 2008, I did buy a bunch of the Mountain House vacuum-packed food cans, which is food that is suppose to last for 25 years. We'll see.

Any other food is made essentially of water, which evaporates and spoils the food.

My first experience with this was with the white sugar, which after 1-3 years starts to "clump," but if you add some water once you are ready to use it, and it fixes right up. :)

But food storage is a tricky (and/or expensive) business.

tweell said...

Sigh. Yes, we had the food conversation in 2008 and you didn't learn anything. Read:
http://waltonfeed.com/blog/show/article_id/162
I'm at the 'ranch' now and learning lots, but it's daunting how much more I need to know.

confederate miner said...

Greg, are you familiar with the milk contracts? Which one would be be the best for speculation class 3 or 4? Right now the class 3 is trading down while the 4 is up.

Stephen B. said...

I couldn't find total dairy per capita at that site either, but in general, flat to down dairy consumption is something I always assumed anyhow.

Milk is such an old-fashioned, June Cleaver kind of thing. Anybody who has seen the way the beverage cooler at the Circle K has morphed into an entire wall or two, with all kinds of prepared, sugary, watery beverages understands that dairy is but a small part of that growth (not to mention how the shear number of Circle K, 7-11 types of stores has mushroomed over the past 30 years.

While the milk processors have come up with some manufactured milk beverages with color and sugar added, it's but a small part of the crazy, largely unhealthy convenience drink industry of our country.

Part of it, as PP alludes to, is also culturally based. Most dark skinned people don't do dairy nearly as much as European heritage people do. Partly it's lactose intolerance, but partly it's a hatred of white things too (white in more ways than one.)

Anonymous said...

BUREAURAT- are you going Mormon??? Never woulda thunk it.

Just like Glenn Bunk- or is that Glenn Beck?

bureaucrat said...

Anonymous,

Huh??

bureaucrat said...

What I said about rice, sugar and honey is essentially the same thing as listed on your link.

A lot of the items on that link aren't the items normal people eat. But if you want to eat "peanut butter powder" (whatever that is) after 5 years, be my guest.

Anonymous said...

It doesn’t take as many cows to produce as much milk as it used to. I recall about a decade ago I worked on a couple of bull semen buys for the heard improvement project, and boy was the semen expensive. $80K to $100K a shot as I recall. Anyway, at the time our best cow produced around 40 lbs of milk a day; today we our worst performers produce over 100 lbs of milk a day. I don’t know what a nutrition analysis would show but it still tastes like whole milk.

Also, whole milk is only around 4% so that colored water didn’t remove as much of the butter fat as the name suggests, and probably took almost all of the nonfat milk solids. It certainly removes all the taste.

Best,
Dan

confederate miner said...

Dan does the feed ratio i posted earlier seem correct to you?

Anonymous said...

Confederate,

I have no idea, you’re over my head.

Best,
Dan

Bill said...

Bur,

Wheat will last 30 years if packed for long term storage and will retain 85% of it's nutritional value until it is milled.

Beans also last a long, long time.

bureaucrat said...

When I think of wheat I think of a loaf of Wonder Bread. I'm mostly concerned with items you find in a supermarket that people actually buy and eat. :) When someone suggested that, if sugar "clumps" in storage, then I should buy cotton, I said "how do I buy raw cotton in a supermarket?" :) So you're suggesting that I should store a loaf of bread for 30 years and then eat it? I don't think so. :)