Cattle Today

Cattle Today



by: Wes Ishmael

To be fair, members of the Rio Rojo Cattlemen's Association never took themselves so seriously that there wasn't time for an extra story or interruption come meeting time.

“You know the rules,” scolded Peetie Womack, just as Izzie was about to drop a pile of quarters into the juke box at the War Wagon Saloon. “This is Info-Plosion night, remember?”

It costs lots of jingle and time to go to cattle conventions, especially national ones. That's why members of the Rio Rojo Cattlemen's Association began pooling resources to fund the attendance of one of its members at various meetings each year as an official delegate. That included pitching in to keep the delegate's business going while they were away. “We'll pay everything except bail money,” they'd told Hooter the last time he served as delegate.

In return, the delegate took seriously his charge of gathering the information the other dozen members wondered about. That delegate came armed to deliver all he'd learned at these Info-Plosion meetings, some of which had been known to last all night, no Pearl and no music.

This year, Charlie was chosen to attend the National Cattlemen's Beef Association annual meeting in Reno. It was the first time he'd been to either. Now, everyone was gathered around the meeting table, note books and pencils at the ready.

Corn and Stuff

“So, what did you learn?” the whole group said at about the same time.

“Well sir, I figured out pretty quick that it's easier to find a black cow in a section pasture of brush at midnight on the new moon, than it is to find a decent glass of sweet tea in that town,” said Charlie. “I also learned we ain't going back.”

That's what everyone most wanted to know when Charlie went, the odds that grain prices are a bubble with a logical bursting point.

“We all know about the ethanol deal,” continued Charlie. “What I didn't have a good feel for was just how much global grain demand is driving the cart. A guy from Cattle-Fax said corn consumption around the world has been more than production for four of the past five years, so stocks every year are going down.”

“And prices are going up,” spat Lonnie Johnson.

“Yeah, that same guy said that high prices should ration demand, but that's not what's happening, even though prices are going up, people are buying more of it.”

“What about Distiller's Grains?” wondered Peetie.

“Best as I could tell, there's plenty of opportunity for now, but folks are looking at how to use them for ethanol, too, before the cellulosic stuff.”

“What about cattle feeding?” wondered Bob Houston of Apache Feeders.

“Which part, how much you're bleeding or where at?” said Charlie.


“Like you've said before, Bob. The consensus seems to be that, yeah, on-feed percentages might keep shifting more cattle to the Corn Belt, but in the great scheme of things, it's going to be where it is; infrastructure on both the feeding and packing sides would cost too much to move. The guys up there are seeing more of it in their basis on fed cattle.”

Bob's jaw was still working in concert with his toothpick, but maybe with a touch less intensity.

“And, like you've said before, unless we grow global beef demand a bunch, this is going to be a smaller industry, packing and feeding capacity shutting down to come more in line with cattle numbers.”

Looking at the sober faces, Charlie added quickly, “Speaking of which, those CattleFax boys say there's right at $90 per head of fed cattle left to gain when we can finally get Japan over their age requirements, and South Korea over their boneless specs.”

“Was there any national perspective on cow costs?” asked Peetie.

“And then some,” said Charlie, flipping through a thick notebook jammed with notes. “Stan Bevers over there to Vernon said Southwest SPA data has cow carrying costs at $571.53 per breeding female, and that's for 2006. In another session, Jim Mintert from Kansas State University estimated cow costs in his neck of the woods to be at around $670 per head.”

Charlie waited for that to sink in, then continued, “How's this for perspective. Someone at that same session said some folks in Iowa are sending bred cows to town. They're going to turn over their pastures and plant grain. Can you imagine, have all the feed you want out your back door and send a bred cow to town because there's too much money left on the table if you don't.”

“And freight won't make for any bargains,” said Izzie, putting to words what everyone else was thinking.

“So, unless their hides can be sold for mink, breakevens are going to be a stretch,” said Peetie, mostly to himself.

“You know, that's an idea right there,” chimed in Hooter.

“Hush,” said Lonnie.

“And, all of that is with a great corn crop this coming year,” continued Charlie. “Even with a good growing year and yields similar to last year, the folks at CattleFax say we'll be down probably at least 4 million acres of corn. Wheat and Soybeans are worth too much and have such lower input costs.”

“Sounds like we all should just cash in the cows then, no hope and no future?” growled Lonnie.

“We could,” smiled Charlie. “Or, we can pay more attention to marketing opportunities that return more. They're not for everybody, but I heard tell of lots of those alliance programs while I was there. Even one that pays cost of production, plus a return on investment, another one buying weaned calves for a veal program, a dime over market and they pay freight. And, that's before you ponder the bigger picture. Global demand for grain is moving so high because so many more people around the world have more money for food. Ultimately, that means they'll want more beef, too, and we're the only country that can produce the kind of grain-fed beef that we do.”

On it went, throughout the evening, questions and answers, perspectives and wonderments. Toward what appeared to be the end, Peetie said, “Well you sure gave us more than our money's worth, Charlie. Anything else stand out to you?”

Playing for Keeps

“Yeah,” said Charlie. “Maybe one of the most important things I learned, for me at least.”

“What's that?”

“One of the key note speakers there at the Cattlemen's College lunch was a guy by the name of Kevin Ochsner—real fireball, really motivational. His main point was how we make decisions and the fact that not making a decision can cost way more than making a wrong one. ‘Get off the fence,' he said. But that never really took hold with me until I was tagging along with Sammy Beaverteeth in one of the casinos.”

“You never told me you saw Sammy,” said Hooter, “How is he anyway? How's the hair transplant look…”

“You were saying, Charlie,” interjected Peetie, with an appropriate scowl aimed at Hooter.

“Well, Sammy likes to play the craps tables. I never had. So, I got $10 in chips to learn. For the most part, I played what they call the pass line. It's even money and you're basically betting that whoever is rolling the dice will match the first number they rolled before hitting one of the craps numbers where everybody loses their money.

“It dawned on me, that's a no-decision kind of bet. My money lasted a long time, but eventually the house took it all. Guys like Sammy, who understood the odds, the only no-decision bets they made were more as a hedge. The ones who walked away with more than they came with, bet on specific numbers, specific outcomes. They made decisions.

“That's when it started sinking in, what that Ochsner fella was saying. I'm kind of holding my money together in the cattle business by playing the averages, or the even money odds. While I'm playing the even money, though, if I was honest about it, I'm losing equity over time, because I'm not making hard decisions. I know some things I could do that come with more risk and more return. I'm not choosing my future as much as I'm letting the averages choose for me.”


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