Perhaps because the stocker cattle business is so liquid — and the value of gain continues to offer profit potential — there doesn't seem to be any credit crunch so far.
“The lenders are taking a hard look but the rules are the same as they were, 30% margin (equity) on stocker cattle,” says John Hughes of Hughes Cattle Company at Bartlesville, OK. Hughes and his son Robert were the 2006 BEEF National Stocker Award winners. (Learn more about them at http://beefmagazine.com/mag/beef-hughes-cattle-co-stocker-award-winner/.)
Likewise, stocker operators and bankers in South Texas and northeast Colorado said recently that credit for buying stocker cattle and the rules for it remain the same as they were before the meltdown in other areas of the national economy.
Keep in mind, in each of these instances we're talking about local and regional banks that didn't get caught up in the paper-trading chaos of the national and international banks that have been making headlines.
“There are some regional banks in this part of the world that are underwater on some of their real estate loans, but their agriculture loans are in good shape,” Hughes says. “There's certainly no shortage of credit for experienced, qualified borrowers.”
A key concern of Hughes and other stocker operators continues to be the escalation of input costs. Though prices for staples like fuel and other commodity inputs are below recently obscene peaks, Hughes is already buying herbicide because those prices continue to increase. He reckons building a mile of barbed wire fence these days runs about $1.25/ft. You can insert your own examples.
The overall domestic and global financial meltdown serves up plenty of wonderments, too. With beef prices historically high, Hughes explains, “I don't think there will be problems from the supply side, but I worry we'll see it on the demand side.”
Hughes sums up the management challenges presented by the vast uncertainty when he says, “I don't know that I've ever encountered anything like it.”