This is a crazy recession we are in. In my view, energy is the main culprit, especially oil and gas. The number of products made from oil and gas is astonishing, and the remarkable thing to me is that oil is an organic compound made from biological material that is billions of years old.
It’s a confusing economy right now. Inflation is running 10% or more. We have full employment with companies desperate for workers. Wages are going up, fast food joints are paying unskilled labor $15-20 per hour—that’s nearly $800 per week—which sure beats the $2.30 per hour when I was in college. You look around and new commercial buildings are going up as quickly as they can get the materials. Recessions typically have the opposite effect on labor.
If you think about it, the use of our natural resources is where an economy starts. Everything we produce starts with harvesting a natural resource. Then we have advocacy groups that don’t want anyone to use them. I don’t understand why anybody would want to intentionally hurt their economy. We have renewable resources like timber and grass; if they are not consumed, the young growth can’t survive, and then they die. It’s almost as bad as a fire. Natural resources are the basis for all production and wealth.
We have big political decisions ahead of us, and the days of the balanced political statesmen have passed us by. We have a government that is run by advocacy groups with only one agenda. There doesn’t appear to be any businesslike people running the government. COVID-19 money helped a lot of people, and it helped some more than others. COVID was a $4 billion “investment,” then President Joe Biden got his anti-inflation bill passed for another $2 billion in spending. That is a lot of money dumped into the economy, and it doesn’t appear anybody in government thought about what would happen to the economy until it was too late.
We have been living with cheap money for a long time, and for the most part, the economy handled it well. There wasn’t an excessive amount of leveraging by companies or individuals. Farmers and ranchers experienced excessive leveraging in the 1980s when money cost 14% or more. Ten years of cheap interest became comfortable for many folks. Folks bought a lot of real estate and could afford it—not like it was in 2008 with subprime lending.
An entire generation has grown up with cheap money. Young folks don’t realize it yet, but 6% mortgage money is still pretty reasonable compared to the 1980s. The dollar has become very strong in relation to other major currencies, which will hurt exports. A barrel of oil is only $85, which is reasonable, and gas prices are about $3.50 in most of the country—sorry, California.
Then, we have about 2 million undocumented people crossing our southern border every year for the past couple years. They’re undocumented, so they technically can’t be hired to fill all those extra jobs we have.
I don’t know about you, but it’s starting to feel like America is a threshold to the world of prosperity. And can you blame these people? Most just want a better life than they had in their authoritarian-led governments. We take freedom for granted, and a lot of our citizens don’t realize just how much opportunity lies before them.
I haven’t been watching the cattle markets as closely as I usually do the past three or four weeks. But it doesn’t seem like things changed all that much. Boxed beef prices have been flat, around $260. Fed cattle are trading around $145, while futures are trading at a premium to the cash market. This last summer we had more cattle available, cash was leading the way and fed cattle futures were trading at a discount to cash. When cash leads, we should be looking at a stronger market.
Feeder cattle are trading at around $170 or so, and corn prices are relatively stable around the $6.50/bushel zone. Cattle feeders are currently losing $125 per head according to published closeouts. I can’t remember the last time I saw positive margins in cattle feeding. How do cattle feeders endure this market? The markup in feed must cover all the bills.
With the midyear elections coming up, it’s important to slow inflation with more energy production. This administration and all their minions don’t seem to get it. We can force policy directions with this administration, and it must happen. We need a little fiscal conservation to move forward, so vote. A bunch of snow and rain would help too. — PETE CROW
