Baxter Black: I can’t believe it!
January 31, 2014
There continues to be a "mind-separation" from reality regarding the high price of cattle. We cattlemen ease around each other, secretly not believing we just sold 13 heifers weighing 480 lbs for $840 each. Or sold a cull bull weighing 1,605 for 74 cents a pound. He brought $1,200. Or sold 600 weight steers for over $1,000 apiece, or bought 20 bred first-calf heifers for $1,680 each.
It is the happiest coffee shop table talk I've heard since Osama went down! The most common comment, said with a sideways grin and the shake of the head that I hear is, "Man…I can't believe it!"
Most of the analysts discuss the drop in cow numbers as the reason for high prices. But the coffee shop economist is always ready to caution his cronies that it can't last. People won't continue to buy it if it gets too high. But, how high is too high?
A quarter pounder hamburger costs $3. The cost of the meat patty, I'm guessing, is less than 50 cents. Even if you doubled the price of the meat, making the burger cost $3.50, it would not affect sales much. Especially if the buyer often upgrades to a Big Mac EVM (extra value meal) for $4.95 or a McChicken for $4.34, not to mention a 16 oz Coke for $1, a small latte for $1.60 or a medium shake for $1.80 in addition. Where else are you going to get a full meal for less than $5…Starbucks? I don't see protesters picketing fast food places. The USDA (2012) says Americans spend 10 percent of their income for food. Another 50 cents on a burger doesn't affect us near as much as a $1.50 per gallon increase in gasoline. And in the steakhouses from Outback to Ruth's Chris, the cost of the meat is even a smaller percentage of the cost of the meal.
But the statistics on how beef (and food) prices for cattlemen have lagged far behind the cost-of-living increases for other necessary commodities, show we have plenty of room to move up. All the beef that is being produced is being eaten. As price increases, it will still be eaten.
My favorite gauge is to compare the number of fed cattle that it takes to buy a new pickup. I use 1000 lb steers and half-ton pickups to compare. In the 70's it took 12. In the 80's it took 16. In the 90's it took 22. In the 00's it took 26. In 2013 it still takes 26. For a moment in time, beef is keeping up with the cost of living expenses.
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So, for those who can't accept the justification of increased beef prices as a long-overdue inflation correction, or see the changing buying habits of the modern eat-out-microwave 2014 pop up consumer…then sell every critter on your place and wait for the price to go down.
Me, I think I can take a positive outlook and buy some more bred heifers…'cause, "Man, I just can't believe it!" F