August 30, 2016 



BOC Loan






Cash Cattle. A pall remains over the cash markets aggravated by talk of too much meat from all the meats, weak sellers, and fading box prices. Show lists are shortened and slaughter needs will be less than the past two weeks due to the Labor day holiday. Selling continued in the north this week with sales in Nebraska at $110-111. Weak sellers, reacting to a large discount in the futures, allowed packers to take full advantage of the situation. Dressed bids were at $177.


Much of the talk in the trade center around how low prices can go with some suggesting prices might be headed under a dollar. Historic prices of a few years back offered similar volumes of beef into the market at prices much higher than today. However, the markets of three years ago failed to include the excessive supplies of chicken and pork.


Cattle Futures. The futures continued the dramatic decline with little inclination of finding a bottom. August will expire tomorrow and the cash and futures prices are on a path to converge with the decline in cash prices closing the gap. Discounted futures are pulling the cattle to market and the October futures soon to be the spot month show no signs of changing the market direction. With few longs willing to enter the market, there is mostly sellers of futures wanting to get on the bandwagon. 


Carcass weights are released each Thursday and will be a closely watched barometer indicating the position of cattle feeders in the nation's feedlots. The last report released for the week of August 13th, had carcass weights up only 1# at 887# remaining 13# below last year. Seasonally, carcass weights should increase until next winter. The important references will be comparing carcass weights this year with last and determining how those weights impact overall tonnage when compared to prior year.


Forward Cattle Contracts: Once again steep discounts in the deferred contracts will limit forward contracts.   


The weekly breakdown of fed cattle moving to the beef processing plants is as follows. 1) formulas 55%; 2) negotiated 20%; 3) forward contracts 25%. Some of the formula arrangements are week to week negotiated prices and not committed cattle to one plant.


The Cutout. Last week's slaughter was revised to 605,000 or the largest slaughter week of the year. Beef processors will be operating the plants to utilize the facilities to maximum value with the largest margins of the year in the bag. The Labor day holiday shortened week is expected to harvest 50,000 more cattle than last year. Retailers joined the benefits of lower prices and were purchasing beef for current and deferred deliveries. It is difficult to assess how much of the decline in box prices will be passed along to consumers as both the processing and retailing sectors enjoy generous margins.


The cow slaughter has remained consistently above prior year. Heifer placements are increasing in the nation's feedyards and all indications are that the ramp up in the nation's cow herd is concluding. The larger cow slaughter has also resulted in an increasingly large supply of frozen beef in storage.  




Choice CutoutChoice Price Change
198.42Down $1.06
Select CutoutSelect Price Change
192.34Down $1.23









Replacement markets


Buyers are ready for another major reset of replacement cost as a falling fed market is causing major re-evaluations of placement strategies across the plains. September is the beginning of the fall run of stocker and feeder cattle. Live cattle futures are sending the message that fed prices are not finished falling and establishing a sustainable price level for fed cattle might require moving prices towards $100 -- a price not seen for five years.


Many feedlots are choosing to wait out purchases for the October buying period with expectations of another large drop in feeder prices occurring between now and then. If fed prices are destined for a dollar then feeder cattle are going to fall another $20 cwt.. is the thought of many buyers. Sellers who have passed recent bids can only reprice the cattle and suffer the declines.


Western ranchers are finding some bad news on marketing plans for this year's calf prices. Heath difficulties off many of the isolated and remote ranching locations in the west have introduced serious and severe health problems for buyers introducing those naive animals into an environment full of pathogens. This is encouraging a "common sense" practice of weaning calves on site at the location where breeding occurs. Ranchers engaging in this practice gain the advantage of capturing value added premiums for weaned calves and enjoying the luxury of the lowest risk and cost location for weaning to occur.


Oklahoma City. For the second week in a row, stocker and feeder cattle took a hit in auction news. Many buyers complained the drop was not enough. Prices were $5-10 lower with late sales at the lower end of the range.


Feeder futures are falling fast and expectations for fall prices include little optimism and broad concern on price stability. Seasonally and historically feeder prices bottom in October.  This year the base weight on the contract changes in November giving a relationship between Oct/Nov a unusual pricing relationship with November a discount instead of premium.


Feeder Cattle Cash Index. The index is in decline mirroring the cash markets it is indexing.


Forward cattle contracting. The basis for forward contracted feeder cattle is being lowered by many feeding firms. Basis trades off the forward contracts are quoted from -$1 to -$2 for a 775# steer delivered to the Texas Panhandle. Many feedyards are filling up and large amounts of unsold cattle remain in grazing locations that have enjoyed good rains and are finishing the season with green grass growing.         


The National Weekly Feeder Summary released on Friday of each week tracks the national prices by region for last week.   


Corn futures. A large fall out in the grain markets continued in early week trading. Contracts for both corn and wheat were setting new lows. While many feeding operations have switched to wheat, the large carry in the wheat contract will cause many to switch back with new crop corn. Harvest is beginning on the southern plains. Grain elevators continue to carry large stocks of last year's corn along with an abundant wheat crop. Corn basis quotes over the December are around +20 cents in Guymon Oklahoma. Corn is now pricing into rations at $5.80 cwt. in the Oklahoma Panhandle compared to wheat at $5.60 cwt..


Department of Amplification


A friend of ours called his local order buyer bright and early this week and conveyed the following message:


"i wanted to call you before you called me and tell you i won't be wanting or buying any cattle this week. Furthermore, I won't be ever buying any more cattle so please don't call and pester me. If I should call you in a few days and order some cattle, don't believe me and if you ship them, I won't pay for them. I am recording this message and will be archiving it for future use."





We all want to eat healthy. Certainly, there are some foods that, in excess, are bad for your health and obesity is a negative judged by any standards. The government wants to start making food companies that advertise their products as healthy – prove it. This is the point when developing standards gets problematic and putting judgment calls on various foodstuff into a politically charged environment can result in confusion and misinformation.


We all remember being told by the government to drop butter and instead substitute margarine. Apple producers remember the government report on Alar that ruined the apple market for years. Howard Lyman on the Oprah show warned consumers that mad cow in our beef supplies would kill hundreds of thousands of people by the year 2000. This does not negate the importance of food safety and our country provides some of the safest food in the world.


Now some researchers have helped the process along by studying how perceptions of foodstuffs affect their taste and desirability in the mind of the consumer. This is a more useful area of inquiry than judging the healthfulness of foodstuff by government bureaucrats. In a recent study, researchers wanted to find out whether people’s beliefs about how cattle were raised would influence their objective judgment on how the meat taste. The researchers presented 146 people with two identical beef samples. Each sample came with a label reflecting sourcing information designating each portion either from: 1) a factory farm; or, 2) A humanely raised farm [code for family farm]. No one was aware they were all eating the same beef regardless of the label. Overwhelmingly, the people chose as superior beef the humanely raised beef and were oddly specific about why it was superior. The factory farmed beef “had a bad smell” or “looked less appetizing” and of course, tasted less pleasant. The factory raised beef tasted greasy to some. Some even left half of the factory beef on the plate while eating all of the humanely raised portion.


People want the food they eat to reflect their personal values beyond serving their physical needs. The study reflects the serious problem in the beef industry that few consumers understand the pejorative use of a meaningless term “factory” or the equally meaningless term “family farmed”. The study emphasizes the importance of a beef campaign that tells beef’s story in a manner that makes the product attractive to the consumer because the consumers understand more about how and who produced the beef. The media is skilled at portraying beef producers as factory farmers when the urban newspapers creating the copy have little to no knowledge about best management practices in rural America. This puts the burden of introducing to consumers the hard working individuals who care about the animals they raise and spent countless hours seeing that they receive the highest level of care and the beef processors who spend millions of dollars a year to assure a healthful product.


Telling the story of beef producers is telling multiple stories -- one at a time. The notion that beef producers are compromising quality or health standards in beef production is rubbish and needs to be clarified at the retail counter. This is not only the job of the retailer but also the packer and those operating in the live animal sector.  





Sections of the newsletter are redesigned with hyperlinks to the appropriate source pages. The hyperlinks are in light blue within the report.










Regional differences in grain and cattle basises create a difficulty in modeling a national composite for current close outs or a proforma forward look at a breakeven. Readers should consider your own area for adjustments to these models. 




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.

750 # Feeder Steer1,095.83146.11
Cost of Gain 600 pounds433.600.72
Estimated Interest(Prime + 1%)29.27 
Current Breakeven1,553.35115.06
Current Futures1,476.63109.38
Net Profit / Loss-76.72-5.68


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.

750 # Feeder Steer OKC 150 days ago1,200.00160.00
Cost of Gain 600 pounds465.600.78
Estimated Interest(Prime + 1%)26.50 
Resulting Breakeven1,692.10125.34
Current Texas Panhandle Cash1,551.96114.96
Net Profit / Loss-140.14-10.38

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