Agricultural News
The Current Cattle Market Making Reality Checks Now That We Gotten Past Labor Day
Tue, 14 Sep 2010 3:34:02 CDT
Against a backdrop of very supportive supply fundamentals, there is much reason to be very optimistic about cattle prices in general and for the foreseeable future. At the same time, there are several market factors that remind us that there are limits to just how strong prices can realistically be.
Not surprisingly, boxed beef prices have dropped back a bit from pre-Labor Day highs and, in fact, dropped below $160/cwt. for Choice last week. Nevertheless, wholesale beef values are still roughly $10/cwt. higher than the August lows. Fed cattle prices, which briefly spiked to $100/cwt, have dropped back into the upper $90s. At current levels, boxed beef and fed cattle prices are compatible and, while boxed beef is looking for some footing, fed cattle prices seem solidly grounded to maintain current levels for the rest of the year.
Feeder cattle prices are relatively strong and are likely to remain so through the fall. Stocker prospects, in terms of both economics and production potential, look pretty good and will likely maintain demand for lightweight stocker cattle this fall. Feedlot demand, especially for long yearlings is expected to more than match available supplies but the extent of feedlot demand for middle-weight feeders will depend on evolving corn prices this fall. Seasonal weakness in feeder prices is likely to be muted this year compared to typical fall price decreases.
The reality checks have already been alluded to above. While export beef demand remains very supportive, domestic demand, particularly for middle meats is rather sluggish. If boxed beef can stabilize near current levels, the situation described above is sustainable for the remainder of the year. Additional weakness in boxed beef prices will begin to pressure fed cattle prices as well. Domestic beef demand will continue to limit boxed beef and fed cattle prices until additional economic recovery results in stronger domestic beef demand.
The other unknown is the corn market. Current estimates for corn production are for the 2010 crop to match last year's record crop of 13.1 billion bushels. Yield estimates have decreased recently and could drop a bit more. Use estimates have risen for exports and industrial use at the expense of feed use. Current corn supplies can best be described as barely adequate and corn prices will likely remain above $4.00/bushel and could spike quickly if ending stock levels drop from current minimal levels. Additional strength in corn prices will ration corn use, especially for the cattle sector, and will limit feedlot demand for lighter weights of feeder cattle.
Our thanks to OSU market economist Dr. Derrell Peel for these comments from the weekly email that he and Dr. Glen Selk collaborate on- Cow/Calf Corner.
WebReadyTM Powered by WireReady® NSI
Top Agricultural News
More Headlines...
