Searching for Profitable Margins
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Agriculture is like any other business in that producers are searching for ways to achieve profitability. Their margins, the difference between revenues and costs, depend on many factors: weather, crop yields, livestock birthing rates, production costs, demand, etc. Within agriculture, crop and livestock margins tend to be countercyclical. When crop margins are high, livestock margins are usually low and vice versa. This relationship makes sense as high crop prices create strong revenues for crop producers, but high production costs for livestock producers; and the current pricing situation shows the opposite holds as well. Low crop prices create weak revenues for crop producers and lower production costs for livestock producers.