FEBRUARY 3, 2011   

MARKET REPORT AND ANALYSIS

Futures prices tumbled at noon on Friday following sales in the north at $124 and in the south at $123. Cattle sold at $199 in the beef in the north and all prices were steady to weak with last week. Futures prices dropped two dollars following disappointment on beef demand and cash sales. Early week optimism was mostly from sources outside the industry. Three weeks of smaller slaughter has failed to stimulate sales. February is historically not a strong month for beef demand.

Boxed beef prices weakened into week's end. Recent export business has been smaller than expected. The choice cut out was quoted at $183 and select at $178. The spread was quoted at $4.50. 

Recent rains across Texas, New Mexico, Oklahoma and Kansas may set the stage for a squeeze on replacement cattle. January placements may be higher than some expected leaving small pickings for the balance of the spring. If rains allow some restocking of the drought out areas in the southwest then availability of cattle for both feedlot and grass pastures will be problematic. A 750# feeder steer was selling for $154 on the south plains.  

Corn prices flattened out at week's end. Traders will start giving more attention to this year's allocation of acres to the new corn crop.  The basis in Guymon Oklahoma is $.70 over December contract. Corn is now pricing into most rations at $12.75 cwt..

"ACTING UP" OR "ACTING OUT"

Posturing is nothing new to cattle trading. Buyers and sellers have different objectives, mostly in pricing, but frequently those varied interest result in verbal banner that should be taken lightly. No seasoned experienced trader accepts information presented as factual by a trading partner. This is not to say the parties on opposite sides of a trade are lying but they simply are asserting their spin on the market and naturally that spin favors their position.

It would be unusual to hear a list of reasons why the market is headed up from a trader who is short the futures. Likewise a bull would rarely explain all the reasons the market should go down. People talk their position and never was this more apparent than this past week.

Retail store beef buyers when purchasing beef from the processing plants insisted they might need extra time to pick up the meat only to order it in to the distribution centers the day following the transaction. Packer bids this past week often included a condition of extra days for pick up. This happened during a period of the smallest cash trade in weeks. Packers offering boxes for sale, reported to some buyers that they were likely to be unable to offer some cuts because of the trimmed slaughter and shortage of inventory. Feedlots, with empty pens starting to surface, mentioned to feeder cattle brokers that they were not confident they would have space for new purchases.

A little spin is fine. Sometimes the spin becomes exaggerated and is reminiscent of children not able to get their way. Children, frustrated with their inability to obtain an objective, act up or act out that frustration. The result is the most obvious manipulative behavior that fools no one and achieves nothing. Some of the information passed back and forth this past week bordered on the humorous rather than than normal spin.

The frustration coming from sectors of the beef production chain struggling with margins is understandable. Another cattle inventory showing shrinking herds means less product available to an expanding market. Nothing could be worse than watching your industry price itself out of the market because of product shortages.

SUSTAINABLE AGRICULTURE --- Link now to this series below

PART ONE -- SUSTAINABLE AGRICULTURE

PART TWO -- THE FACTORY FARMER

PART THREE -- THE FAMILY FARMER

PART FOUR -- THE NEW RELIGION

PART FIVE --  MICHAEL POLLAN

PART SIX -- FEEDING THE WORLD

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.

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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