Weekly Feeder Cattle Risk Management Analysis
Weekly USDA feeder cattle prices for TX and OK were used to calculate projected breakevens on cattle bought last week, week ending March 25, 2011. Breakevens were calculated for each weight group within sex (steer and heifer). Ration price, $/ton dmb, was estimated at $320. Other variables including interest, yardage and % feed financed were estimated to be 6%, $0.05/d and 100%; respectively. As it is known that actual input estimates will vary greatly by region and by yard within region, our goal was to illustrate pricing differentials between weight classes and sexes of cattle.
Cattle markets rebounded quite strongly after the break two weeks ago. Live cattle cash trade was $1.00/cwt lower in the Texas panhandle at $113.00/cwt, however, northern trade was higher at $114-115. Strong cash trade rallied the futures board to levels that were higher than two weeks ago, prior to the Japanese earthquake and tsunami. Feeder cattle movement and prices were relatively strong, but freight costs began to depress prices of cattle coming out of the southeast.
In addition, demand for early spring grass is beginning to wane as most of the cattle have been procured. Going forward, until weakness in the live cattle trade or boxed beef price is apparent we anticipate a healthy feeder market. This week USDA will release its acreage estimates for new crop corn, private estimates have been accepted by traders and unless the government’s estimates are much too high then it appears as though strong support has held in the corn market following the break two weeks ago. Still the problem with high feeder cattle and corn prices make it difficult to buy a fat breakeven, but the calculated loss is the least negative it has been since the beginning of the year, 2011.
