Post by Glenn on Feb 11, 2013 10:00:15 GMT -6
CATTLE MARKET REPORT AND ANALYSIS
THE MARKETS
Futures prices fell again Monday as news of a possible shutdown of packing plants hit the markets. Obama is threatening a furlough of government inspectors on March 1st having the effect of closing all meat processing facilities. Politics and budget deliberations have no place with scare tactics threatening perishable food processing operations.
Packers aren't dumb. They long ago abandoned the IBP business model of killing all you can and let the chips fall where they may. Today's beef packer assesses the supply of cattle to be offered and the demand for beef and tailors the hours to slaughter to fit the mix. When margins are negative, they are careful not to tip the balance by slaughtering enough cattle that cattle feeders gain trading advantage. They want to slaughter short of the number necessary to clear show lists so keep sellers on the defensive. They don't collude but they do make slaughter decisions in unison much like the airlines changing prices. They trimmed the slaughter last week to under 600,000 for the first time this year for a full week.
The smaller slaughter number will allow a rebuilding of the demand side. The winter months are never good beef months and as we push towards spring, demand will improve. Retailers will likely take advantage of lower prices to sponsor some beef features in stores. The snow storm in the northeast will disrupt some beef movement. Box prices softened at week's end. The choice were quoted at $182 and select at $180. The choice/select spread was $3.
Feeder futures crashed last week. Multiple theories surfaced to explain the drop in prices, the largest of the new year. The true cause is simply exhaustion. The buy side of the equation is tired of losing money. Feedlots across the plains pulled back purchases for a major reassessment. They have little control over grain prices or fed prices but they do control the purse strings for cattle purchases and sometimes a empty pen or closed facility is preferable to losing $100+ on every head owned. A 750# feeder steer was quoted at $147 in the southern plains.
Corn prices posted a major decline last week. Traders are keeping a close eye on developments in the South American crops while monitoring moisture conditions for our new crop. Corn cost into most rations in the south is currently at $14.25 cwt.. Corn is trading at +.90 bushel basis for Guymon Oklahoma priced off the March contract.
THE MARKETS
Futures prices fell again Monday as news of a possible shutdown of packing plants hit the markets. Obama is threatening a furlough of government inspectors on March 1st having the effect of closing all meat processing facilities. Politics and budget deliberations have no place with scare tactics threatening perishable food processing operations.
Packers aren't dumb. They long ago abandoned the IBP business model of killing all you can and let the chips fall where they may. Today's beef packer assesses the supply of cattle to be offered and the demand for beef and tailors the hours to slaughter to fit the mix. When margins are negative, they are careful not to tip the balance by slaughtering enough cattle that cattle feeders gain trading advantage. They want to slaughter short of the number necessary to clear show lists so keep sellers on the defensive. They don't collude but they do make slaughter decisions in unison much like the airlines changing prices. They trimmed the slaughter last week to under 600,000 for the first time this year for a full week.
The smaller slaughter number will allow a rebuilding of the demand side. The winter months are never good beef months and as we push towards spring, demand will improve. Retailers will likely take advantage of lower prices to sponsor some beef features in stores. The snow storm in the northeast will disrupt some beef movement. Box prices softened at week's end. The choice were quoted at $182 and select at $180. The choice/select spread was $3.
Feeder futures crashed last week. Multiple theories surfaced to explain the drop in prices, the largest of the new year. The true cause is simply exhaustion. The buy side of the equation is tired of losing money. Feedlots across the plains pulled back purchases for a major reassessment. They have little control over grain prices or fed prices but they do control the purse strings for cattle purchases and sometimes a empty pen or closed facility is preferable to losing $100+ on every head owned. A 750# feeder steer was quoted at $147 in the southern plains.
Corn prices posted a major decline last week. Traders are keeping a close eye on developments in the South American crops while monitoring moisture conditions for our new crop. Corn cost into most rations in the south is currently at $14.25 cwt.. Corn is trading at +.90 bushel basis for Guymon Oklahoma priced off the March contract.