U.S. Cattle Herd

This quote comes courtesy of the University of Tennessee Agricultural Extension Office:

At What Point Do We Run Out Of Cattle? (Cattle Trader Cen‐ ter, 11/15) ‐‐ The U.S. beef cow herd has decreased 12 of the last 14 years, dropping from a cyclical peak of 35.3 million head in 1996 to the January, 2010 level of 31.3 million head. This represents the smallest beef cow herd since 1963. Combined with smaller dairy cow numbers, the 2010 calf crop is expected to be 35.4 million head, the smallest U.S. calf crop since 1950. Total U.S. cattle inventory has decreased by almost 10 million head since 1996 to the January, 2010 level of 93.7 million head, the smallest cattle inventory since 1959.

Cattle, unlike pork and poultry, DO NOT breed very fast.  Total consumption of beef is not falling... ergo the U.S. has come to depend on imported beef and cattle.

It is quite fascinating to watch government policies kerbolix things so badly.

Gold/Cow (or steer) ratio

Here is a data point that, I think, supports my "own livestock over gold" position.

It wasn't always that way. Texas had been known as the "Longhorns" for years, but before a group of students dragged a gaunt, frightened steer onto the field at halftime of Texas' Thanksgiving Day game against A&M College of Texas in 1916, the preferred mascot was a dog. UT alum Stephen Pinckney had spotted the orange-tinged longhorn on a cattle raid in Laredo and bought him with $1 contributions from 124 fellow alumni. It arrived just in time for the A&M game on a boxcar with no food or water.

Steer prices in the early 1900's were 10 to 15 cents per pound, live weight.  The steer in question here was likely a 1000 lbs, give or take, and went for $124.  Gold at the time (let's use the entire decade's range) was $15 to $35, ergo the gold/steer ratio was 3.5/1 giver or take... today it is roughly 1/1.  While this is by no means a perfect metric, if you have significant assets my bet is 1,000 head of cattle and pasture land will be a far better investment (if MANAGED) then would be 1,000 ounces of gold.

In my opinion.... either Gold comes in or food prices leave 100 million "food insecure" here in America because food prices, especially meat, milk and perhaps even eggs, would need to rise a great deal to high support corn, wheat, rice... which in turn have helped drive gold through by signaling inflation... and I really don't think producers are in ANY POSITION to pass costs on to consumers... you can draw your own conclusions.

Oil is still the $64,000 question.

Oil prices and inventories

Oil prices continue to disassociate itself from the U.S. inventory picture... Despite an unexpected rise in Oil inventories, Oil is up over $2 as I write this.

The "recovery" might be anemic, but so are any increase in Oil production.  I spoke at length with The Mad Scientist last night (he thinks I am all wet and Oil will hit $60 before $100... and he may be right... that's why we have buyers AND sellers... if there were only buyers, oil would already be over $100), and while there are a number of dangers to this "long oil" hypothesis of mine, the European debt crisis, a recession in China... it is my assertion is that spare capacity is NOT one of these dangers.

You see, I think the producers are producing FLAT OUT.  I don't think that there is a single drop of "Shut In". Not F%^$#ing one (and if I am wrong I will be gone... eventually I will catch this thing, and until then my mentality is to NOT LOSE). If I am correct, then any further stimulus in the world economy (hint, hint.... QE2) will drive Oil prices higher - perhaps much higher.  The world  economy has been able to absorb $80+ oil for months now... the temptation to produce at these prices is simply too great to be passed on by the producers... ESPECIALLY since these VERY attractive prices have not cut into demand... it would appear to me that oil price elasticity is falling... my bet is that it appears that way to Saudi Arabia, Russia, Iran, the UAE..., too.

I have NO OTHER EVIDENCE other than the price mechanism... its not like I have friends with Aramco... and of course no big producer or big importer is going to say anything truthful... why would they?  Both sides are in a "don't make waves" standard program of denial... and I don't fault them for this in any way.  What should the POTUS do?  Walk up to a microphone and say Oil supplies are going to continue to decline for the U.S.? If he did, Oil would be at $120 and never look back... with all of that outcome's concomitant effect on the U.S. economy and employment.  And the producers?  They never had it so good!

This cannot be analyzed using the disinformation coming out of the big exporters and importers.

North Korea, China and the U.S.

China's favorite distraction/evil doer was it again yesterday... seems sinking a ship was not enough to get the U.S. administration knocking on China's door for help... me thinks yesterday's activities might do it.

Anybody who thinks that North Korea woke up one morning and decided to shell the South's territory or sink its naval ships just for the heck of it just ain't applying themselves... here's the deal... China wants something from the U.S. or wants to influence the U.S... China gets N.K. to agitate... S.K.'s goes to its protector... protector goes to China... China has a much better shot of altering whatever American policy they find offensive with the U.S. knocking on its door asking for help.

As I have said before... a nuclear event ANYWHERE in the world would sterilize the industrialized nation's financial system overnight.  China's government has a far better shot of surviving that then any of the West's governments....

So what does China want?

It would seem to me that they do NOT want the U.S. unilaterally devaluing the US$... and, irrespective of their own monetary moves of late, they CERTAINLY do not want to tip their own economy over into a recession... China has the perfect vehicle in N.K. to continue to tweak policy in D.C... provided that they do not overplay their hand.

Oil prices

I think we are back to the point where a significant price spike in Oil could happen at any time.

Yea, China is "tightening"... B.S. China is P.O.ed and bluffing/negotiating. The Federal Reserve is going to use every dime they have threatened to... or lose all credibility forever (actually, that might have already happened... and nothing is impossible... but I would not count on the Fed backing down now).  The world ex-U.S. is increasing its demand for petroleum products... and the supply is simply not there.  Consumption within the exporters continues to grow briskly, as it is in Asia and Latin America... could a Europe blow-up throw oil demand off a great deal?  Maybe, but not for long (and probably not).

Ergo, demand will brought into equilibrium via price (spike)... and given prices are already in the low 80's.. . and given the fact that the U.S. unemployment picture is not likely to get much, much worse... and, bad as it is the U.S. is still consuming Oil like it was cheap...

All of the above I interpret as indicating much higher Oil prices sometime in the next 24 months is highly, or very highly, probable.

This is not a market call... In the short term markets exist to make us look dumb... but I am getting long here in the commodity and lightening up on the energy equities...

OK, so that's what I am doing trading wise (if I am wrong, I am gone)... IF (emphasis on "IF") it turns out I am correct and sometime before election-time-2012 there is another move in Oil, say, to a high of $120 to $180 (I didn't say oil was going to stay high...  I said it could spike higher until demand gets chocked to near death...) there will be no place for the U.S. Federal Government to hide.  The IEA is out... the EIA, at the direction of the Feds, is going to come out, too.

The U.S. will be forced to come clean on "Peak Oil Imports" or "Peak Oil" or "the End of Cheap Oil" or whatever label they are going to use.... the point is, in finally acknowledging it for what it is, the Government's acknowledgment that the Age of Oil is drawing to its close will have a profound impact on markets, politics, economics, population, immigration.... just to name a few.  A Profound Impact.


All of those hoping for the Government to "Do Something" are going to get there wish... As always, careful what you ask for - you just might get it.

This time, if I am right about a surge in prices, you might just get it.

So what policies might the Federal Government enact? What can they really do? Not very much... and a great deal.  Over the long term, not very much... in 20 (more likely less than 10) years the Oil age will be all but over if it is measured against our lifestyles now (inflationary or deflationary?  Who cares? I am going to spend any money I have left over after my Oil and farmland investments on one h*ll of a good time).  In the short term?  All manner of huffing and puffing, sucking and blowing, spitting and stammering... is in the cards, I'm afraid.  The propaganda effort launched by various special interest groups in an effort to leave somebody else holding "the bag" will be mind-boggling, and it will absolutely, positively begin in earnest immediately following the next Oil price spike.

Peak Oil, The USDA, Warren Buffet and Bob Rubin, not necessarily in that order...

Bob Rubin, former U.S. Treasury Secretary and CEO of Goldman Sachs (but then I repeat myself) was out in the media warning of a coming "Bond Market Implosion.

Thanks, Bob... not really sure what we would do without your top level decision making and informed opinion.  Weren't you Chairman at Citibank when they blew up the f&($#@!! world?

Every day that I wake up and don't read about a "crazed gunman" (or gunmen)  at Goldman Sachs et al I am pleasantly surprised... Even Warren Buffett is getting into the act of opening his mouth when he should keep it shut.  Seems Warren was out on the news wires today thanking the Federal government for all those bailouts.... Warren, didn't you learn ANYTHING from your nit-wit-curmudgeon-partner Charlie Munger? Ya know.... I even went with the TARP... even though I knew it would save many that deserved to blow up from blowing up... because it was better than the alternative - martial law.... but this has gotten ridiculous.  Not only have we kept the establishment jag-off-emporors-with-no-clothes in f&*^ing power... we are handing them bonuses and helping them refi their luxury diggs in Manhattan (not that those diggs will be worth 2 nickels rubbed together).

WTF is with TPTB?  I thought they were educated... knew their history... this "Let them eat cake" talk is a really, really dumb idea at a time when 50 million Americans are food insecure.  Here's my response as to what the establishment should eat: "Let them eat S!#!".

The USDA has the freaking gall, the b@11$, to come out with that?  More than half of those 50 million food insecure folks live in rural America - the same rural America that has been destroyed by government policies emanating out of the very same USDA that brings this to our attention.  These knuckle heads have reduced working class people in rural America to Food Stamps/SNAP... and with the same policies encouraged the wave of illegal immigration our country does not know what to do about.  Read this thoughtful article at Sharon Astyk's excellent blog.  The USDA has conceived and enforces regulations that came about in the time before refrigeration and germ theory.  We have 50 million unemployed Americans... but if one of them wants to go into the home dairy business they can't - unless they have $16,000 for a pasturizer.  You mean Americans can't heat milk up to a certain temperature on their stove? Really?? We have 50 million unemployed Americans... but if one of them wants to open a butcher shop or a slaughter house they have to build a facility that includes all the comforts of home, including a PRIVATE BATHROOM, for a USDA inspector?  And the purpose of this is to protect us?  Or is it to provide a monopoly to the industrial food giants?  It certainly isn't to protect us... last time I checked thousands of Americans were sickened or killed by eggs, cheese, spinach... just last year.

The regulators have made it IMPOSSIBLE to open a business, in food or anything else.  The regulatory compliance our government's have created has hamstrung American entrepreneurship... and at a time when Corporate America isn't hiring, well this is baaaaaad JuJu.

Because Peak Oil is here.

That's right.  As it turns out, despite all of the public denial from Big Oil, the MSM, world governments, and the rest of the establishment, after further review the IEA is out in print saying that 2006 was the peak in  conventional Oil production... BUT we don't have to worry because Saudi Arabia's production will increase by 50% and the Canadian Tar Sands along with the Orinoco Tar Sands will save the day...

I got a better shot at getting pregnant.

Forget the IEA's silly assertion that we will find and then produce 50 million barrels a day from fields we don't know of by 2030... WTF is up with their models that say the exporter's will continue to export to us right up until they can't?  What, they have no internal political debate? Those nation's will just altruistically keep sending their oil abroad when it is obviously in their best interests to retain the oil domestically?  Or does somebody really think we'll send the military "over there"... and just steal it?  Yea, those wars in Afghanistan and Iraq went sooooo smooooothly that we just can't wait to do it again.

Oil imports are down 3.5% this year from last, and down a little over 20% from their peak in 2005 - 20% in 5 years - and our body politic thinks the best thing to do is to print MORE money to try and grow the economy.... without Oil?  And then.... what if?  What if Saudi's ruling family falls in a revolution? What if Iran sinks a couple of tankers in the Straight of Hormuz? What if Nigeria decides they want the Oil internally?  What if.... a lot of things...

There are no macro solutions for a system predicated on ever increasing oil imports... there are only individual solutions... every time I read one of those sob story pieces in the New York Times about some middle class person falling into poverty I want to reach out to the writer and say: "soon you too will be in the same fix... you and everybody else". This is not a problem with a solution.... this is a condition to be managed and lived with.

50 million Americans are "food insecure", according to our government, and; Peak Oil is 4 years in the past, according to the International Energy Agency... its all about you... its never too late to do something smart.

Meanwhile, back at the Ranch....

This is my new breeding hog, Otis.  He is only 50 pounds and less than 3 months old, but he should weigh in between 500 and 750 lbs of twisted steel and sex appeal when fully grown.  I plan on keeping 4 sows and breeding Otis, a Hampshire hog, and raising a bunch of hogs.  

This is Bonnie's new friend Naomi.  She is providing the extra milk, along with the goats, to help grow those young hogs.

The USDA says that over 50 million people are "food insecure".  It never seems to occur to the USDA that it was THEIR REGULATIONS that have caused much of this disaster in rural communities across the country.  They are lower than pond scum.

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I don't know who Chris Whalen is, but it appears that, like me, he thinks California, New York, and a few other "Blue States" will absolutely, positively default on their debt.

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Looks like deflation is gaining the upper hand to me.