September 1, 2014
CATTLE MARKET REPORT AND ANALYSIS
This past week brought higher cattle prices in spite of
packer's reduced purchasing needs for a holiday shortened slaughter week.
The indication and early signal was late Thursday when a major packer
purchased cattle at $155 and then ordered them in to the plant the next
morning. This news prompted sellers across all regions to hold firm to
asking prices. Sales of cattle
were $2-3 higher with most live sales from $155-156 and
in the beef sales at $245-246. The August live cattle contract expired
spot on to cash prices.
Packers will not be so willing to concede prices on boxes
in the coming week. Three weeks of lower prices for beef cuts may provide a
foundation for new retail interest knowing that smaller supplies will be
available in the coming months. The post holiday period which as the weather cools tends to be a good
beef eating period. Choice box prices
were quoted $246 with select at $234 and the spread widened to $12.
Replacement cattle have undergone two weeks of erratic
price movements sparked by a sell off in feeder futures that sent the
contracts down $15 cwt. but now are retracing much of that lost ground.
During the course of the decline, demand remained strong as industry
participants fought over dwindling supplies.
Theories of bunched feeder supplies in October have left
many feedyards with empty pens waiting to reload this fall. If those heavier
runs fail to develop, many yards will go into the winter with limited
capacities. A 750# feeder steer
was selling for $218 in the southern plains.
Sampling of yields across the nation is turning up yield
estimates as the country prepares to bring in a large corn crop. September
is a transition month when the new crop starts creeping into use threatening
the usually high basis.
In the Texas Panhandle where feedlots have been paying up to $1.50 over the
futures, that number should drop in half. DDGs and other ethanol byproducts are being offered into the market
at favorable pricing for cattle feeders. Corn is now pricing into rations
at $8.50 in the southern plains.
LOOKING FOR THE COMING WALL OF CATTLE
In May of this year, the analysts reminded us that heavy
placements the first few months of 2014 would be coming to market in June.
Most forecasts called for the market to fall into the $130s for fed cattle.
June arrived and the additional numbers never materialized but the
forecasters moved the arrival date to July then August and now September.
There is some evidence of a lack of currentness in the
pool of available fed cattle for sale. Carcass weights have been steadily
moving higher than prior year since early July. They currently are 10-15#
above last year. The additional carcass weight adds about 5% more beef to
the tonnage than last year but still leaves overall tonnage well short of
Some of the marketing of heavier cattle is by choice and
not because cattle are backing up in the feedyards. Feeders are hesitant to
sell the current cattle and replace with high priced feeders requiring at
least $165 for a breakeven. On an absolute basis, many pens are being sold
each week with no replacement cattle put back.
This past week signaled the thought that there may not be
a wall of cattle in September or anytime soon for that matter. Talk is cheap
and packer buyers who have been carrying the message of larger supplies in
September, may find sellers unimpressed. Our recent cattle on feed report
featured the last of a long string of reduced placements that should keep
cattle on feed at historically small numbers into the foreseeable future.
The fuel for this year's upsurge in fed prices is the
status of the nation's breeding herd. The cow calf operators are not selling
cows. The upcoming wall of cattle won't be in the feedlots for a while but
as breeders place cows in every nook and cranny across the nation, there
will be more stockers and feeders before you know it. The breeding herd has
ramped up like no other cycle in the history of the business. Next year will
feature the beginning of increasing supplies of stocker and feeder cattle
and when the numbers start they will be large.
The Cattle Report introduces the FEEDER METER. The report
estimates profit or loss for currently purchased feeder steers and projects
a result 150 days out. The chart
is interactive and updated every 15 minutes in real time based on changes in
futures markets in grain and cattle. Corn basis information is based on
current trade prices adjusted every two weeks. Feeder prices and fed cattle sales are
par the appropriate futures contract.
CURRENT CLOSE OUT
The Cattle Report estimates current profit or loss on
cattle placed on feed 150 days ago. This report generated from
industry averages attempts to simulate a typical close out based on
prevailing purchase prices for a feeder steer 150 days ago. The close out
assumes grain was purchased at market each month. Selling prices and
interest rates are based on prevailing benchmark quoted prices. This chart
will change weekly.
click on "CHECK OUT THE
MARKETS " to go to the market page
CLICK HERE TO SEND YOUR COMMENTS