The Economics of Tractors
Three out of four economists predict a recession within the next two years.
Bond yields are higher in the short term than further into the future. This is backward. Typically, investors make more money by holding it longer.
RV sales have declined for the past two years. Before the last four recessions, people stopped buying RVs.
But economists have predicted 22 of the last five recessions.
Within agriculture, cattle producers have suffered a recession for a few years now.
About a third of the price paid for live cattle relies on international trade. While U.S. trade policy maintains consistent chaotic volatility, beef exporters work overtime to find various buyers.
The Tyson slaughterhouse in Kansas that burned last month created more chaos and volatility because 6 percent of the beef ready to be processed had nowhere to go.
The week after the fire, cash cattle prices dropped between five and 10 percent. Future prices fell, too, while packers doubled their profit margins.
The USDA is investigating.
Meanwhile, commodity beef producers are hanging on by their toenails.
A recent survey found that the best producers spend an average of $800 to $1100 per animal unit to raise beef.
This doesn’t even include the expense of keeping replacement heifers and bulls, which don’t fall free from the sky -- at least not to the Graham Ranch.
A 550-pound steer sells for $900 to $1000 right now. Those cow-calf producers might make about $50 per head in net profit. Right now, packers are making about $500 per head.
Cow-calf producers are stubborn and resilient so we choose from two strategies to wait out low prices.
We either increase our income by finding an alternative to commodity markets or we reduce costs.
We actually have three strategies, but few ever choose to raise sheep.
When I planned my budget for the year, I knew I would avoid spending money on any extras. I had a little buffer, but I’ve lived long enough to know surprises appear out of nowhere.
By March, my pickup needed a new transmission. A transmission is cheaper than a new truck so that was a no-brainer.
In June, I decided to cut and bale my own hay with my brother’s help -- and a big gamble on my haying equipment.
In July, as I drove the tractor to the stackyard for a corral bale, oil began spewing from the right side of the engine. It turned out to have diesel mixed with the oil. And the clutch was shot.
In August, just as Roger almost finished baling, another tractor lost its hydraulic pump.
To fix either of them, the labor involved would cost more than the tractors are worth and not a single mechanic would guarantee all of their problems would be fixed.
My buffer vanished.
I have four tractors and all of them are younger than I – barely. The two with major mechanical problems are the oldest and work hardest.
My third tractor is the same model that Rock and Roll’s Elvis had, but a different tractor. My husband, Steve, brought Elvis with him when he moved to Montana.
Elvis does not have a loader, but it has an engine and a clutch.
Once my mechanic realized I would not take his advice and buy a new tractor with four-wheel-drive, a cab and a functional heater, he installed all of the working parts from the clutchless tractor on Elvis.
I brought it home last Saturday.
I don’t know whether our country will face a recession soon or when commodity cattle prices will pay a ranch’s expenses or what my mechanic will charge, but I do know one thing for sure.