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The media has gone to great lengths to ensure that everyone knows about the impending decline in cattle numbers and subsequent expected drop in beef production. Is the material herd liquidation a good thing or a bad thing? I am going to be a contrarian here and say that it is the latter. The futures market is attempting to price in this historical decline in cattle numbers. Feeder cattle futures have soared to levels that will be problematic for the feeding industry. Keeping a pen full of feeders on feed would have an interest cost of over $130-140 head per turn for just the animal itself if you have the cash equity for everything else. The cattle industry is highly capital intensive and high leverage is going to be the demise of some feedlots who will not survive the credit crunch coming at them. The price of feeder cattle will become a rationing process to determine which of those who want to continue feeding cattle can afford the investment and risk. Feeder cattle producers are being offered an enormous profit potential opportunity. Will futures prices materialize? We would suggest Livestock Risk Protection (LRP) insurance policies (talk to Eric Relph 712-227-1110…

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