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?

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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.”

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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.