November 26, 2014
CATTLE MARKET REPORT AND ANALYSIS
PLAINS MARKET TALK
Packer bids of $171 were refused in pre-Thanksgiving trade
action. Most asking prices remain at $3 over the December live cattle
contract. This week's show list at 220,000 cattle was smaller than last
week's small list and well under last year's 277,000. Packers are purchasing
cattle in Iowa for $170 and shipping them to Texas for slaughter. This would
imply a $175 market in Texas.
The bipolar nature of the two markets [futures vs. cash]
was never more validated than when the final prices were posted of late
Friday trade on fed cattle in the plains. Kansas was able to push the market
up to $173 and Nebraska and Colorado both sold cattle for $174 or two to
four dollars higher than the previous week. These sales set the "$2 over"
sales to $175-176.
Futures traders and hedgers want to sell the market.
People sense the market is high and will go down. The short sellers don't
want to be left holding the bag when it happens. In order for the futures selling
not to be a rout, the cash markets must prove resilient to downside
pressures and they have. Each sell off has been followed by
a higher high. Packers have shown they are concerned about supplies into
April by jumping into the market with $3 over the February futures for
January and February cash cattle.
This week's slaughter will likely be one of the smallest
of the year. Box prices are improving steadily prior to Thanksgiving. The
holidays are a feature period for turkey but beef has been claiming an
important part of the holiday plate as some consumers choose special high
quality roast for family occasions. Choice box prices were quoted at $257 with select at $244 and the
spread at $13.
Futures traders, cattle owners and cattle dealers have
concluded the top in feeder prices is in. Feedlots are backing up bids as
they watch the sharp decline in feeder futures. Many auction sales will
close this week and receipts and activity will slow and remain in a quiet
status through year end. Large negative margins for feedlot placement will
keep feeder prices on the defensive. A 750# yearling on the
southern plains was selling for $237.
Corn resumed an upward track. A Republican Congress might not be inclined to continue
the support for ethanol that has come from the Democrats. The previous indication
was to leave the mandate number of ethanol in gasoline at 10% but thousands
of corn farmers were pressing for raising it to 15%. Corn prices fell as
momentum for raising the standard appears to have weakened. The corn
basis in Guymon, Oklahoma is currently quoted at +$.50. Corn is
now pricing into rations at $7.75 cwt. in the Oklahoma Panhandle.
OUR SOUTHERN NEIGHBOR
Immigration may have been the centerpiece for the
President's speech but for cattle owners, issues impacting cattle movements
across the border received more attention as economic forces at work
affecting herd sizes and cattle movements directly affect their bottom line.
The primary cattle raising states of Sonora and Chihuahua were directly
impacted by the same drought that crossed major grazing areas in the United
States. These areas have been blessed with rains and the result should be a
rebuilding of Mexico's breeding herds.
Instead the sky high prices of cattle in the United States
aggravated with the power of a rising dollar, has thrown the rebuilding
process into a tailspin. Instead of holding heifers and rebuilding, Mexican
ranchers are cashing in heifers by crossing them for sale in the United
States. Mexican cattle also are routed to a emerging and growing Mexican
feedlot demand. Imports of feeder heifers from Mexico are up 29% from last
The United States has long relied on imports of feeder
cattle from both Mexico and Canada. In the southern plains as many as 35% of
cattle placed on feed in the fourth quarter will be from Mexico. Over a
million head of cattle cross the border into the United States for grazing
and feeding with Mexican origin. This important source of cattle in a time
of shortages was damaged by the unfortunate COOL legislation.
The rebuilding of the Mexican breeding herd is important
to our industry. Genetics is a priority and many Mexican ranchers refused
during the drought and high feed cost period, to make the long term
investment in improved genetics. The result is many of the Mexican herds are
inbred and cattle performance is far under the U.S. counterparts. The
Mexican herds need the diversity of the U.S. seedstock to assure improving
performance that has allow feedlots to finish steers at 1450#.
Missing from the livestock industry is a national animal
database that could provide an important benchmark for all breeders and
cattle owners. This would allow cattle owners across all sectors the ability
to identify and correct deficiencies in performance.
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.
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