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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 year.

 

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.

 

 

 

 

 

 

 

 

FEEDER MATRIX

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.

INPUTSTOTAL$$CWT
750 # Feeder Steer1,800.83240.11
Cost of Gain 600 pounds495.960.83
Estimated Interest(Prime + 1%)42.02 
Current Breakeven2,333.92172.88
Current Futures2,172.15160.90
Net Profit / Loss-161.77-11.98

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.

INPUTSTOTAL$$CWT
750 # Feeder Steer OKC 150 days ago1,537.50205.00
Cost of Gain 600 pounds518.660.86
Estimated Interest(Prime + 1%)31.38 
Resulting Breakeven2,087.54154.63
Current Texas Panhandle Cash2,322.00172.00
Net Profit / Loss234.4617.37

 

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