Page 8 - MWC 04-01-2021s
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The Midwest Cattleman · April 1, 2021 · P8


       Live Cattle                                                           Feeder Cattle Daily

      Live Cattle:
         Last week’s $1 higher trade ends a period of seven weeks at $114.   Feeder Cattle:
      The market is now pricing in the belief a demand pull starting this     Even with the February cold snap this year’s beef cow process-
      spring will more than offset the seasonal increase in fed cattle offer-  ing rate has run 2% over 2020 in the first nine weeks of the year.
      ings in April and May. Additional help comes from the fact weights    It is 14% over the same period two years ago. Drought, still seen
      have been reigned in far quicker than we expected.                    in many areas, is a problem. The flip side of this issue is we are
         The Federal Reserve currently estimates a 6.5% improvement         continuing to draw down the beef cow herd, ensuring higher prices
      in GDP vs. last year. That would be largest one year increase since   in the years-out forecast. Our view of a three year period of higher
      1984. With short term interest rates remaining near zero through      cattle pricing remains in place, separate from the virus/fiscal/mone-
        Live Cattle:  My thoughts center around this market stabilizing now.  I’ve been
                                                                               Feeder Cattle:  All you have to do is look at the corn market for a reason for the
       placing a bullish tilt to this market for some time now.  I may need to temporarily  tary issues specific to 2021. Smaller calving numbers and increased
      2023, fiscal stimulus, and the ending of virus lockdowns beef de-     pull-back in feeders. If I owned a feedlot I’d be nervous to say the least.  I do feel
       place this on “hold” for a while.  The higher placements the last three months will  packing capacity should increase the live animal share of the retail
      mand is expected to run strong Q2 on out. We suggest $117 for eco-    the feeder market has overdone it to the downside and it will be tough to break it
                                                                            further.  The early corn harvest has most feeder buyers in the field and I don’t think
       have a negative impact on prices yet, so like they say, “All good things come to those
      nomic value on the June contract but expect psychological support     dollar in the years ahead. This view is even stronger given the an-
       who wait”.  I see production numbers staying over last years’ levels until at the
                                                                            they’ve really had time to concentrate on buying feeders.  Let’em get caught up a
      will make that the low end of pricing. October and December are       nouncements since the last March 11 issue. We now have expansion
       least the end of the year.  Beef shipments have been lagging last years’ levels now
                                                                            little and they’ll head to town.....checkbooks in hand....bulging with “corn” money.
      seen with economic value at $123 and $125.                            announced at the Tama, Iowa plant and a new one in the works at
                                                                            This market will rally....wait and see.
       for about a month.  Two weeks ago they were 8% lower than last year.  This weeks
       report showed exports a whopping 56% lower than last year.  This ain’t good.  Low  North Platte, Nebraska.

       imports and high exports have held this market up all summer.  We’re starting to   Though we do not forecast a major change for general feed prices
       lose some of that.  I just can’t pull the trigger yet on long term bullish hopes.  over the next year we can suggest a stronger pull on calf and feeder
                                                                            prices later this spring/early-summer.
                                                                                                  Trading commodity futures involves substantial risk of loss
                                                                                                  and my not be suitable for all investors.  The recommendations
       Rich Nelson                                                                                express opinions of the author.  The information they contain is
       Allendale Inc.                             Allendale Inc.                                  obtained from sources believed reliable, but is in no way guaran-
       815-578-6161                                                                               teed.  The author may have positions in the markets mentioned
                                                                                                  including at times positions contrary to the advice quoted herein.                                                                  Opinions, market data, and
                                                                                                  recommendations are subject to change at any time.
       What Does this Report Mean to Me?
        Q #1
       Q: Should I continue to hold upside protection on future feeder purchases?
       What do you think the price of fats will be in April 2011
       Answer: It’s hard to see the forest for the trees here, but peering through the foliage I see $105.00 fats on the horizon for April.  Demand is
       A: Yes. The $146/$156 May feeder cattle call spread discussed in the previous issue is doing its job just
       going to have to kick in though in order to get it.
       fine. We want the feeder side locked in and the Q4/Q1 fed cattle pricing open. We will be evaluating feed
        Q #2
       cost hedges if given the chance over the next two months.
        Due to the recent break in feeders, would you be holding your fall-weaned
       calves for a while or letting them go?
       Q: Is there much pasture being moving into crop production at these prices?
       Answer: What ever happened to the easy questions?  This will depend upon your weaning sched-
       A: There has been a 12% decline in all-hay acreage over the past 10 years. Drought in many areas has
       ule and your available feed supply.  I’m long term bullish the feeder market but the “reality” of
       right now probably dictates letting them go.  If you keep them for an extra 30 days, make sure you
       exaggerated this hot forage market. There may be another 200,000 acre removal from last year’s 52.238
       minimize the grain in the ration.  Grow them on good forage....”sell” $4.50 corn.  If the fat market
       million acres of pasture.
       stays sluggish and corn prices don’t moderate, about the only thing you’ve got to hang your hat on
       for “higher feeders” is “Hope”.
                                                                             November  6th


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                                                                              16 - Breeding Bulls 7 to 18 months             RH Standard Lad 0313
                                                                              16 - Spring Calving Bred Females                Solid As A Rock Sire Group
                                                                              16 - Spring Calving Black Females  Reynolds Herefords
                                                                                      Bred to Hereford Bulls
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