Page 8 - MWC 8-25-2022s

The Midwest Cattleman · August 25, 2022 · P8

MARKET REPORT

Live Cattle Feeder Cattle Daily

Live Cattle:
Over the prior two weeks cash cattle saw gains of up to $6/ Feeder Cattle:
cwt. The trade is now preparing to move beyond the well-sup- As we get closer to the coming fall calf marketing the sale barn
plied summer 2022 market and get into a tighter supply scenar- is still holding some strong pricing. Calves are running 13% over
io which will not end for years ahead. While we agree with the last year. Feeders are 15% over. After aggressive heifer inflows
Feeder Cattle: All you have to do is look at the corn market for a reason for the
Live Cattle: My thoughts center around this market stabilizing now. I’ve been
general tightening supply narrative, we do not agree with one of since last fall many are questioning how many of the 2021 born
placing a bullish tilt to this market for some time now. I may need to temporarily
pull-back in feeders. If I owned a feedlot I’d be nervous to say the least. I do feel
the market’s biggest cheerleaders, USDA. They see US beef pro- calves are still left to place. That also is a problem when we are
place this on “hold” for a while. The higher placements the last three months will
the feeder market has overdone it to the downside and it will be tough to break it
duction running year over year declines of -5% for Q4, -7% for Q1 preparing for another year over year decline in the coming num-
have a negative impact on prices yet, so like they say, “All good things come to those
further. The early corn harvest has most feeder buyers in the field and I don’t think
and -8% for Q2. The problem with their view is Q4 supplies are they’ve really had time to concentrate on buying feeders. Let’em get caught up a
who wait”. I see production numbers staying over last years’ levels until at the bers this fall.
already in the feedlot and there were no placement declines near little and they’ll head to town.....checkbooks in hand....bulging with “corn” money.
least the end of the year. Beef shipments have been lagging last years’ levels now
for about a month. Two weeks ago they were 8% lower than last year. This weeks
5% in prior months. Q1 supplies are mostly known by this point, This market will rally....wait and see.
report showed exports a whopping 56% lower than last year. This ain’t good. Low
the September COF report, covering August placements, will be
imports and high exports have held this market up all summer. We’re starting to
the last main piece. We are not seeing a general narrative of a 7%
lose some of that. I just can’t pull the trigger yet on long term bullish hopes.
decline verified.
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.
rnelson@allendale-inc.com Opinions, market data, and
recommendations are subject to change at any time.
What Does this Report Mean to Me?
Q #1
Q: What strategy are you discussing for taking advantage of these high futures prices?
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
going to have to kick in though in order to get it.
A: After a three month rally, we now suggest buying a $154 February put, selling a $146 put and selling a $166 call as a
package. This locks in a floor for downside protection from $154 to $146. The upfront cost is also lowered by selling a call quite
Q #2
a bit away. The upfront cost would be around $1/cwt. with a small margin requirement. This allows for a floor but also allows
Due to the recent break in feeders, would you be holding your fall-weaned
for a full rally of up to $12 if seen. This is our strategy for November – April finishing cattle and will be considered in place for
calves for a while or letting them go?
future commentaries.
Answer: What ever happened to the easy questions? This will depend upon your weaning sched-
ule and your available feed supply. I’m long term bullish the feeder market but the “reality” of
Q: When will the feeder market peak out?
right now probably dictates letting them go. If you keep them for an extra 30 days, make sure you
minimize the grain in the ration. Grow them on good forage....”sell” $4.50 corn. If the fat market
A: Cash feeders, 7 – 9 weights, normally are peaking out right now. Futures, with a specific chart formation in mind, are supporting
stays sluggish and corn prices don’t moderate, about the only thing you’ve got to hang your hat on
the view of 192.12 for November and 193.10 for January. We agree with those prices 100%. A strategy for protecting future planned
for “higher feeders” is “Hope”.
marketings in Q1 would involve buying a January $190 put and selling a $178 put. Selling a $200 call would allow you a full $10 of
November 6th
upside participation. The upfront cost, separate from a small margin deposit, is about zero at current values. This will be considered
Auction
in-place for future discussions in this commentary.
Lunch at 11:00 a.m.
Sale at 12:30
Sale Offering
16 - 2010 Heifer Calves Jan. - May
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
8 - Fall Calving Pairs 1071 County Road 1231
6 - Show Steer Prospects
Both Horned & Polled Offered Huntsville, MO 65259
Home: 660-277-3679 • Matt: 660-676-3788
November 5, 2010 Sale offerings on
Display 3:00 P.M.
CHB Dinner at 6:00 P.M. • Barb: 660-676-4788
Call or E-Mail for Catalog Email: reynoldscattle@cvalley.net