PLAINS MARKET TALK
Cash Cattle. Bids finally surfaced and were lower as expected. Bids of
$190 dressed in the north were refused. Cattle owners seem less willing to
turn over this week and mid week bids are unlikely to attract any sellers.
Packers once again would like to confuse trading by bidding on cattle for
June delivery hoping all the transactions are confused with sales for next
Cattle Futures. Early trading made the futures look like they were going
to stall out. Late day trading revived the advance upward for futures and
June led the way with a triple digit gain. Technical signals also were
supportive to further advances.
released for the week of April 16th showed a 2 pound decline in steer
weights. This is a continuation of seasonal trends but has failed to fall as
fast as most experts forecast. Steer weights remain 14# above last year.
Carcass weights and the tonnage associated with the carcass weight reports
are a key factor in setting the tone for the cutout and assessing beef
Contracts: Cattle forward contracts bought for May delivery are well
under last year. Packers sensing tight supplies in May and June are
attempting to remedy that condition by adding more forward contracts.
Current bids at $192 dressed for late May vs. $6 over the May board.
The weekly breakdown of fed cattle moving to the beef processing plants is
as follows. 1) formulas 55%; 2) negotiated 25%; 3) forward contracts 20%.
The Cutout. Boxed beef prices were lower but seem to be looking for a
floor and if they are able to find a bottom, many believe we will see the
cutout work higher. Lower prices for the cuts is seen as positive signal for
retailers to sponsor specials in the coming weeks.
|Choice Cutout||Choice Price Change
|Select Cutout||Select Price Change
Oklahoma City. Early week auction results were reflective of recent
pessimism and prices were mostly steady to weak. Prices in auctions and the
country continue to react to negative futures and losses in almost all
segments of the beef pipeline. Many handy weight feeders were selling in the
low $140s with heavier steers dipping into the $130s. Calves also suffered
losses as most summer grazing demand is waning and breakevens for fall call
for much lower prices.
Feeder futures were able to stay in the plus column assisted by the
large drop in corn futures. Traders will be keeping one eye on the fed
cattle and the other on corn prices. Feeder futures are one of the lightest
traded contracts and volume on one side or the other tends to push them
Feeder Cattle Cash Index. May is the spot month and now will set a new
barometer against the index.
Weekly Feeder Summary released on Friday of each week tracks the
national prices by region for last week.
Corn futures. Corn futures gave up additional ground at mid week. This
year's corn crop is now 45% planted. Farmers who have been searching for a
bail out on this summer's crop are focusing on futures for an entry point
for hedges. The basis is currently around 30 over the May contract in Guymon
Oklahoma and is softening. Corn is now pricing into rations at $7.00
cwt. in the Oklahoma Panhandle.
BEATING UP ON RED MEAT
Denmark proposed a tax on all beef sold in the country in order to
discourage beef production and consumption. The tax was an offset to their
notion of the contribution cattle raising made to global warming from cattle
as methane producers. Bill Gates, the Microsoft founder, also has weighed in
saying he will be eating less red meat in order to make a small impact on
Global warming is an issue that requires action on the part of humans but
targeting animals used for food is a misdirected start. The consensus among
expert nutritional opinion is beef serves an important role in a balanced
diet and as a source of iron, zinc, raboflavin, and other important
nutrients, it should remain an important part of every diet.
The beef industry depends on the good will of young folks who will grow to
become the future buyers of beef products or not as their education
dictates. Beef gets a bad rap on college campuses across the nation. That
needs to change and opinion makers need more and better information from
scientific experts to carry the message of the value of beef in the diet.
Localavores are a part of the food reform movement who would like to tax any
food not raised within 50 miles of the grocery store. This leaves many
residents in desert centers like Phoenix wondering how they are expected to
grow local foods. This movement insists on locally grown beef and ignores
the realities of today's beef production and the value of aging on the beef
The difficulty of getting beef's message out in the media is a challenging
one. The industry must rely on elite universities whose opinions matter to
the press and influence tracks with opinion formers in the country. The
check off dollars must be used strategically to promote and educate.
NOTE TO READERS
Sections of the newsletter are redesigned with hyperlinks
to the appropriate source pages. The hyperlinks are in light blue within the
FURTHER NOTES AND EXPLANATIONS OF BREAKEVEN/CLOSE
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.
CURRENT BREAKEVEN PROJECTION
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
|750 # Feeder Steer||1,109.25||147.90
|Cost of Gain 600 pounds||505.73||0.84
|Estimated Interest(Prime + 1%)||30.45||
|Net Profit / Loss||-60.64||-4.49
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.
|750 # Feeder Steer OKC 150 days ago||1,425.00||190.00
|Cost of Gain 600 pounds||519.02||0.87
|Estimated Interest(Prime + 1%)||31.15||
|Current Texas Panhandle Cash||1,673.06||123.93
|Net Profit / Loss||-302.12||-22.38
Click here to "Check
out the markets "
Click Here to send your comments