Credit crisis hits feeder, stocker cattle
By Drovers news source
| Wednesday, October 08, 2008
Tight credit is compounding the impact of high feed prices for producers wishing to place cattle on wheat pastures or into feedlots, contributing to weaker prices in recent weeks. According to a Reuters news story, deposit requirements for placing cattle on feed or growing them on wheat pastures have doubled in some cases, up to 40 percent of production costs. The article quotes Lane Broadbent, livestock analyst at KIS/OKC Trading in
Grain prices have declined along with the stock market in recent days, which would normally be good news for cattle feeders. But the financial crisis is likely to undermine some positive market fundamentals for beef. The market has pointed toward a fall rally in the fed market for several weeks, which now seems in doubt. Cattle feeders have struggled with negative margins for months. Those losses, combined with tighter credit on cattle operations, would suggest additional pressure on stocker and feeder markets.
The bottom line for the beef market is how the current crisis will affect consumer demand. And with consumer income squeezed, it’s likely beef demand will decline. Unfortunately, no one expects the current mess to end quickly. — Greg Henderson, editor
