Lee Pitts: Spring High, Fall Low
December 22, 2015
I know what you're thinking. Was the big autumn drop in cattle prices the start of a precipitous downward trend in cattle prices, or was it just a chance for prices to catch a second wind before regaining air speed and altitude?
I'm the wrong guy to ask because I'm the world's most pessimistic person… and I'm never going to get any better. I have b-negative blood and I complain about the noise when opportunity comes knocking.
I have good reason to believe the world is always coming to an end because I started my cattle career in 1973. Now, to you newbies that may not mean much but to those of you who have splotches of white hair under your Stetson, just the mere mention of 1973 is enough make you break out in hives. The first 30 years of my cattle career coincided with the "Golden Age of Wrecks". If anyone went insane and wanted to get into the registered cattle business those of us who worked for cow magazines knew we'd get a good advertising budget for their first production sale, followed shortly thereafter by another good budget for their complete dispersal due to health reasons. They were sick of the cow business. I felt more like an ambulance chaser than I did an ad pimp.
I come from a hardy stock of pessimists and grew up hearing about the panics of 1819, 1837, 1873, and 1907 even though none of my immediate family were alive then to panic. Just as my grandparents and parents droned on about the "dirty thirties" so too will I bore young whippersnappers talking about the crashes 1973, 1986, 2000 and 2008. They'll get glassy eyed listening to me talk about the dairy buyout and the wreck created by a domestic mad cow.
I can hear me now. "Let me tell you just how bad it was. Fat steers were selling for 44 cents, yearlings brought 38 cents and steer calves were fetching 40 cents. Heck, even lambs were outselling calves back during what we called "The Wreck of '73." I was learning how to be a ring man back then and I remember showing up at an Angus bull sale where not one buyer showed up. NOT ONE! I can't remember a single sale in the '70s where we sold every animal on offer and I distinctly remember betting with my fellow ring men on how many bulls we'd sell before we ran out of buyers. At one bull sale I lost my shirt betting the over when it was set at five bulls. I lost because we only sold one. Now that was a wreck!"
I don't know if '86 was as bad as 1973-74 but it ranks right up there with the biggest cattle wrecks of all time. There were two factors in the crash. First was the dairy buyout in which our government was buying entire herds of dairy cows if the dairymen promised to get out of the dairy business and stay out for five years. I feel guilty telling you this but during this period I made the most money I ever did in the cow business. I sat on the seats every week at the nearest auction market and bought calves for as low as 22 cents per pound! I felt so guilty I couldn't sleep at nights and felt shadier than a pumpkin picker's Panama.
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For the past five years I have tried to help a wonderful young couple gain a foothold in the cattle business and they have made more money during those five years than I ever did in 40. I try to tell them that selling replacement heifers for $3,000 each, as they did, is not normal and they should be very careful because we've entered dangerous territory. I told them six months ago to sell every hoof they own so that they'll have the capital to buy when prices are cheaper, as they are now. But they just think I'm a fuddy duddy and want to double down. I say "look out below" because what goes up must come down, while they believe that what goes up must go "upper".
Poor kids. In my life the only things that have done that are the cost of prescription drugs, salaries of seven foot NBA centers and politicians' opinion of themselves.
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