6

votes

Should I stock up on meat before the drought pushes up food prices?

Answered on September 12, 2014
Created July 26, 2012 at 4:58 PM

I know conventional meat producers will be most affected by the current drought. But what about grassfed beef farmers? Frozen meats keep well for a year, right? Any thoughts on this matter?

If this is a logical thinking, I want to seriously look into buying a quarter/half cow.

32f5749fa6cf7adbeb0b0b031ba82b46

(41757)

on July 27, 2012
at 02:45 AM

Keeperpoo is right on, pasture quality is really taking a dive. Not a whole lot of nutrition out there for cattle.

0408fb6c082971b0559503b77eb9483c

(308)

on July 26, 2012
at 09:47 PM

Coffeesnob- somewhere around you there are some butcher shops. They may or may not be hard to find (the 4H people will know all)- but they will be a good source. The fixed price farmers - what's the price? good steak cuts are over $8 or even $11 a pound and ground beef is over $2.50- so a side of beef at $2.59 a pound is great. Depends on the cost and the weight- but start asking (and sometimes a friend will go in with you) Keeperpoo- We are in the Great Basin and rely on water stocks and reservoirs, using irrigation. our water cycle is all snow and conservation use :)

76c885d7d27e6c83542ea493ca866dcd

(2178)

on July 26, 2012
at 08:10 PM

ugh, economics. blech.

1edb06ded9ccf098a4517ca4a7a34ebc

(14952)

on July 26, 2012
at 07:47 PM

This is a great thread you've started, CS.

0a6376917fcaee2c65fbf614543f62cb

(438)

on July 26, 2012
at 07:44 PM

Christof, you have enough grass to export hay? wow. Our prairies look like mowed bermuda grass in the dead of winter. short and brown. We had one cutting of hay early, but nothing since. 2 years of drought in a row.

0a6376917fcaee2c65fbf614543f62cb

(438)

on July 26, 2012
at 07:37 PM

Foreveryoung, There is no grass to feed the grass fed beef. Corn producers are having the same drought, so corn prices are too high for the conventional producers to afford. Both grassfed and conventional producers are basically in the same boat. At least in our part of the country.

0a6376917fcaee2c65fbf614543f62cb

(438)

on July 26, 2012
at 07:34 PM

They (small producers) are selling them off early because they can't afford to feed them and there is no grass for grazing. The people who would normally buy them and "finish them out" aren't buying because they too cannot afford to feed them. Therefore the prices are low now. But these are young cattle that are not ready to be slaughtered, someone (big corp) has to feed them for several more months before they are big enough to slaughter. So, in a few months the people who do feed them out will get top dollar for their finished product.

92d67b02a709cad2250f10848f9178e6

(2422)

on July 26, 2012
at 07:28 PM

Great points. So how do I seek out those ranchers who are selling at low prices currently? My local farmers' prices are more or less fixed... Thier pricing seems pretty resistant to the current economic trends. Do I negotiate with them?

92d67b02a709cad2250f10848f9178e6

(2422)

on July 26, 2012
at 06:44 PM

I am so confused, foreveryoung....lol I read that meat prices will drop temporarily due to the higher availability of meat, since producers cannot afford the livestock feed--grass and/or grain. So both CAFO and grassfed beef industries will try to sell off their livestock at lower prices right now.

510bdda8988ed0d4b0ec0b738b4edb73

(20898)

on July 26, 2012
at 06:43 PM

Yeah, great comment! I was afraid to take it that far, but you're right. You only come out ahead if you know something that others don't because the market prices in all the knowns. I always like to say that the market is the best way to turn knowledge into money.

1edb06ded9ccf098a4517ca4a7a34ebc

(14952)

on July 26, 2012
at 06:31 PM

Oh. They're selling them at a reduced P b/c feedlot beef is cheaper than grass fed beef, ceteris paribus. It's really that grass fed beef and CAFO beef are two different industries as they have two entirely different inputs (corn/soy vs. grass). Gotcha.

1edb06ded9ccf098a4517ca4a7a34ebc

(14952)

on July 26, 2012
at 06:26 PM

I am confused. They're selling off their herds at a loss why? If beef is scarce and in demand, then they should be selling off at a gain. and, if they're selling at a gain, that means future beef prices will diminish when there is lower demand (from buying in the past) or increased supply (from buying in the past and dumping it on the market). Why are they selling their cattle at reduced price now if it's scarce?

464e1c66609d402615ae2b3cf72d53fb

(1472)

on July 26, 2012
at 06:25 PM

I am in Oklahoma also. We are sharing half a cow with a friend that raises cattle. He is thinking about selling some early in that they don't really gain weight in this damn heat we are having. Remember, the cattlemen sell their livestock to "producers" who send them to the feedlots to be tortured before being slaughtered.

1edb06ded9ccf098a4517ca4a7a34ebc

(14952)

on July 26, 2012
at 05:45 PM

but I just realized coffee snob is not looking to arbitrage, but to buy and hold. So yeah, it really all depends upon the cost of storage to coffee snob and the magnitude of this affected price change (assuming it pans out).

1edb06ded9ccf098a4517ca4a7a34ebc

(14952)

on July 26, 2012
at 05:41 PM

Yes, but if everybody thinks the price of beef is going to go up, buying all the beef now will push up short-term prices, and dumping the beef on the market in the medium-long run will result in diminished long-run prices. So, this will only work if cofeesnob is keen to the expected future price rise and others not. Many others already are, and available data based upon past draughts (all of greater severity) have shown that meat prices are affected very little.

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6 Answers

4
0408fb6c082971b0559503b77eb9483c

on July 26, 2012
at 06:49 PM

I live in Nevada. Beef here isn't changing much just yet, but likely will as we start exporting hay and corn.

1: the OK ranchers are selling at a loss, because right now there is a glut in the selling market because people are trying to turn cattle they cannot - CANNOT- feed into cash. that depresses CURRENT prices. Nothing to do with grass fed versus feed lot finished.

the futures market is going up because production costs for 6 months from now (look at corn and soy and other feed crops) are going to rise and due to the selloff (and butchering) now- the supply will be more limited in 6 months.

2: it's always a good idea to get a quarter or half beef. Generally speaking this will mean a more local butcher, a more local animal, and if you pay a little attention to the source, a healthier fed animal. Almost certainly not a pure grass fed omega everything certified more-than-organic cow. But also almost certainly better than the grocery store.

The price per pound is generally about half what you pay retail once you calculate the various cuts- AND you get the organ meats if wanted.

92d67b02a709cad2250f10848f9178e6

(2422)

on July 26, 2012
at 07:28 PM

Great points. So how do I seek out those ranchers who are selling at low prices currently? My local farmers' prices are more or less fixed... Thier pricing seems pretty resistant to the current economic trends. Do I negotiate with them?

0408fb6c082971b0559503b77eb9483c

(308)

on July 26, 2012
at 09:47 PM

Coffeesnob- somewhere around you there are some butcher shops. They may or may not be hard to find (the 4H people will know all)- but they will be a good source. The fixed price farmers - what's the price? good steak cuts are over $8 or even $11 a pound and ground beef is over $2.50- so a side of beef at $2.59 a pound is great. Depends on the cost and the weight- but start asking (and sometimes a friend will go in with you) Keeperpoo- We are in the Great Basin and rely on water stocks and reservoirs, using irrigation. our water cycle is all snow and conservation use :)

0a6376917fcaee2c65fbf614543f62cb

(438)

on July 26, 2012
at 07:44 PM

Christof, you have enough grass to export hay? wow. Our prairies look like mowed bermuda grass in the dead of winter. short and brown. We had one cutting of hay early, but nothing since. 2 years of drought in a row.

3
1edb06ded9ccf098a4517ca4a7a34ebc

on July 26, 2012
at 06:00 PM

Miked is partially correct. However, if most people believe the price of beef is going to rise, buying up beef now will put upward pressure on short-term prices, and holding the beef for medium/long term use or selling the beef for medium/long term gain through arbitrage, will result in diminished future prices (due to a diminished demand in the former, and increased supply in the later). So, Coffesnob, you will only gain from this if you are alert to what others are not. Unfortunately, the case is that you're probably not savvy to what others are not already, as it's being talked about all over mainstream media outlets. Additionally, historical figures based upon past (more severe) droughts indicate that the cost of meat has risen insignificantly (note: I didn't read that myself, I heard on NPR while driving a few day back, but it's data, not opinion, so it is probably accurate). Most people have a distorted view of arbitrageurs from media bias, but the reality is that (unless it's one individual buying up all the shares) the consequence of most futures markets is actually diminished price volatility. So, me, personally, I am not buying up large quantities of meat now, and I think I'm safe unless you know something that myself and most everyone else does not. However, I think everyone is on the same page as yourself. Oh, and additionally, since you're only going to buy 1 cow, it's most likely not even worth bothering based upon the amount. IT would be like expecting the value of the dollar to rise in the long run, and buying an extra nickel now.

Hope that helps.

76c885d7d27e6c83542ea493ca866dcd

(2178)

on July 26, 2012
at 08:10 PM

ugh, economics. blech.

510bdda8988ed0d4b0ec0b738b4edb73

(20898)

on July 26, 2012
at 06:43 PM

Yeah, great comment! I was afraid to take it that far, but you're right. You only come out ahead if you know something that others don't because the market prices in all the knowns. I always like to say that the market is the best way to turn knowledge into money.

2
0a6376917fcaee2c65fbf614543f62cb

on July 26, 2012
at 05:26 PM

I live in Oklahoma and have beef producing friends. They are in Osage County, near the"Tall Grass Prairie" . ...... there is NO grass Anywhere. Everyone is selling off their herds at a loss because no one has grass, nothing to cut to make hay and no one can afford to feed them. If you can, but NOW.

1edb06ded9ccf098a4517ca4a7a34ebc

(14952)

on July 26, 2012
at 06:26 PM

I am confused. They're selling off their herds at a loss why? If beef is scarce and in demand, then they should be selling off at a gain. and, if they're selling at a gain, that means future beef prices will diminish when there is lower demand (from buying in the past) or increased supply (from buying in the past and dumping it on the market). Why are they selling their cattle at reduced price now if it's scarce?

92d67b02a709cad2250f10848f9178e6

(2422)

on July 26, 2012
at 06:44 PM

I am so confused, foreveryoung....lol I read that meat prices will drop temporarily due to the higher availability of meat, since producers cannot afford the livestock feed--grass and/or grain. So both CAFO and grassfed beef industries will try to sell off their livestock at lower prices right now.

1edb06ded9ccf098a4517ca4a7a34ebc

(14952)

on July 26, 2012
at 06:31 PM

Oh. They're selling them at a reduced P b/c feedlot beef is cheaper than grass fed beef, ceteris paribus. It's really that grass fed beef and CAFO beef are two different industries as they have two entirely different inputs (corn/soy vs. grass). Gotcha.

464e1c66609d402615ae2b3cf72d53fb

(1472)

on July 26, 2012
at 06:25 PM

I am in Oklahoma also. We are sharing half a cow with a friend that raises cattle. He is thinking about selling some early in that they don't really gain weight in this damn heat we are having. Remember, the cattlemen sell their livestock to "producers" who send them to the feedlots to be tortured before being slaughtered.

0a6376917fcaee2c65fbf614543f62cb

(438)

on July 26, 2012
at 07:34 PM

They (small producers) are selling them off early because they can't afford to feed them and there is no grass for grazing. The people who would normally buy them and "finish them out" aren't buying because they too cannot afford to feed them. Therefore the prices are low now. But these are young cattle that are not ready to be slaughtered, someone (big corp) has to feed them for several more months before they are big enough to slaughter. So, in a few months the people who do feed them out will get top dollar for their finished product.

0a6376917fcaee2c65fbf614543f62cb

(438)

on July 26, 2012
at 07:37 PM

Foreveryoung, There is no grass to feed the grass fed beef. Corn producers are having the same drought, so corn prices are too high for the conventional producers to afford. Both grassfed and conventional producers are basically in the same boat. At least in our part of the country.

32f5749fa6cf7adbeb0b0b031ba82b46

(41757)

on July 27, 2012
at 02:45 AM

Keeperpoo is right on, pasture quality is really taking a dive. Not a whole lot of nutrition out there for cattle.

2
510bdda8988ed0d4b0ec0b738b4edb73

(20898)

on July 26, 2012
at 05:21 PM

It's just investing in futures. If you believe that the future price of beef will be higher than the current price plus your storage costs, then you will win by buying now. I don't have much space, so the cost of storing extra beef isn't worth it to me. But you have the space and want to put the effort into ordering a 1/2 cow and storing it go for it. Just make sure you do the math and make sure the potential savings are worth the costs for doing it.

1edb06ded9ccf098a4517ca4a7a34ebc

(14952)

on July 26, 2012
at 05:45 PM

but I just realized coffee snob is not looking to arbitrage, but to buy and hold. So yeah, it really all depends upon the cost of storage to coffee snob and the magnitude of this affected price change (assuming it pans out).

1edb06ded9ccf098a4517ca4a7a34ebc

(14952)

on July 26, 2012
at 05:41 PM

Yes, but if everybody thinks the price of beef is going to go up, buying all the beef now will push up short-term prices, and dumping the beef on the market in the medium-long run will result in diminished long-run prices. So, this will only work if cofeesnob is keen to the expected future price rise and others not. Many others already are, and available data based upon past draughts (all of greater severity) have shown that meat prices are affected very little.

1
1d0497f8781845ab371b479455bfee8e

(11157)

on July 27, 2012
at 02:12 AM

I doubt we'll be stocking up on meat, but I have decided to plant a small tiered vegetable garden on the side of my house!

The money I can save on the veggies I can put towards buying meat from the store. At least, that's my plan ;)

1
7bf306ada57db47547e9da39a415edf6

(11214)

on July 26, 2012
at 05:27 PM

This is a good idea regardless of the drought. Everything will go up and there may be supply issues later on. I do hope farmers who concur with our notions of well raised animals won't have to raise prices as much. I've noticed that corn & soy prices are going up, which should not effect our farmers.
I am increasingly concerned that there will be disruptions in supply in America. It is just good insurance to have enough food on hand to handle the problem. Now, if I can only get around to following my own advice...

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