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Doom And Gloom, But Lots Of Opportunity


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Warren Buffett is staying away from stocks. The Fed report shows scant signs of growth. Experts warn the foreclosure crisis is far from over. Unemployment approaches a 20-year high. The value of the dollar moves lower. The U.S. no longer has the most competitive economy, according to latest survey and economic data (replaced by Switzerland).

These are just a few of the stories I read preparing for this week's issue. When you add in the stories about the feeding, dairy, poultry and pork industries, it can be kind of depressing and a little bit scary. These are interesting times, but then again these are the times when opportunities are to be grasped.

JBS announced its intention to purchase Pilgrims Pride this week, which would give JBS a position in the poultry business similar to Tyson and surpass Tyson in having a major position in all four protein arenas.

In times like these, it is hard to have a good long-term perspective; looking ahead just three or four months feels like an eternity. And, with the volatility that’s been occurring, there is good reason for those thoughts.

Certainly, the big drivers are coming from outside the industry right now, which makes predicting the future even trickier than normal. However, there are a lot of positives, as well. People still love their protein, and while beef demand has been dropping along with the declining global economy, when compared to the other protein sources, one has to feel pretty good.

Supplies are tight and will remain so for the foreseeable future. And, the global economy will stabilize; in fact, there are some signs we may already be at the bottom of this macro-economic cycle. Without question, industry numbers are bullish, and compared to our friends in the other segments, we’ve fared better than most would have expected as cow-calf producers. Retained ownership is returning as a viable option, grain prices are down, and hay and grass conditions are generally better in most areas.

While cow and calf prices are lower than they were a couple of years ago, compare that to what the pork and dairy boys have been enduring. Or, compare it to having invested in real estate and/or the stock market – cows have held up better than just about anything with a few exceptions like gold.

Those in a position to do so are becoming more aggressive and history tells us that getting in when others are heading for the exits is usually a pretty good strategy.

Ethanol and the global financial crisis took away what would have been some historically good times for the beef business. And, yes, ethanol appears to be a permanent negative and will significantly reduce the size of our industry. But, when this economy turns around, we’ll see that the good times have been merely delayed.

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