FEBRUARY 8, 2010

Repeated storms crossed the plains a day or two apart. Moisture and cold temperatures are impacting production in the nation's feedlots. Weather forced cash prices higher last week in spite of a weak box beef complex. Higher prices across all regions were reported on Friday. In the south prices reached $87.50 but volumes remained light and weight losses were greater than price increases. In the north, packers raised bids above Thursday's steady money to $137 in the beef and $85 live to close one dollar higher for the week.

Slaughter rates moved from 625,000 in prior year to 640,000 this past week. The increased proved too much for box prices and the beef plants might plan a lighter slaughter week this week. Boxed beef prices closed three dollars lower last week. Choice cuts were quoted Friday at $138, and select at $135 for a $3 spread.   

Feeder cattle have gained support from a falling corn market but weather conditions may turn attention away from replacement cattle this week. Bullish sentiment is also waning as general economic conditions and government intervention threatens the cost structure of cattle feeding. A 750# steer was quoted at $96 in the southern plains. 

Corn prices fell last week but the market was higher in overnight trading Sunday night. March corn has declined from $4.25 to $3.50 recently. Corn is trading at 35 cent premium basis to the March contract in the southern plains.  Corn is now pricing into most rations at $7.00 cwt.. 

WINTER TOLL

A Nebraska cattle feeder commented: This has been once of the worst winters that i can remember." Records are always difficult to top, and global warming has seen recent winters on the mild side, but this year has been wet and cold on the plains. Temperatures have averaged well below the last several winters, by several degrees, and moisture has been ample. Pens have rarely been dry.

The results are not only apparent from a physical inspection of the feedyard premise. One has only to look at the carcass weights reported weekly by USDA. In the most recent reports, all carcasses averaged 12 pounds under last year. Unfortunately, what cattle feeders under-produce for weight, they make up for in head count. In most recent week's report, slaughter rates were 20,000 head above last year. The weight loss amounts to only about 7000 head difference.

Each operation is challenged with marketing decisions. Do you market at a lighter weight or hold the cattle to regain the loss? Cattle feeders are frequently tempted to hold when deferred futures prices are carrying large premiums. More often than not, cattle feeders are advantaged to go ahead and market rather than run the risk of continued wet pens and performance gains costing almost double the selling price for the cattle. Marketing the cattle and buying the futures is generally a more advantageous option.

The weight loss for a particular storm varies with the type animal. English breeds, with longer hair, hold up better in the winter storms. Brahmin types suffer. Cattle with greater than half brahmin blood have been known to go for a month with no gain, only maintenance. Consumption of feed is lower in the winter meaning cattle have less left after they cover maintenance.

Measuring the damage from one storm can be difficult when one storm runs into another. Pens tend to hold their bottom for one storm, or even two, but reoccurring storms never give the pen area a chance to dry and the bottom falls out. Nothing consumers more energy than cattle wading through the mud to the bunk area. The millions of dollars necessary to move in heavy equipment are another toll on an already over-tolled industry.

  FEEDER MATRIX

The Cattle Report introduces the FEEDER METER. 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.

TEETER METER

The Cattle Report introduces the TEETER METER. TEETER means to waiver unsteadily as markets will do. 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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