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The Midwest Cattleman · October 22, 2020 · P8


       Live Cattle                                                           Feeder Cattle Daily

      Live Cattle:
         Since the low in August, corn futures have risen over 80 cents    Feeder Cattle:
      per bushel. DDG prices have gained $40 per ton. Changes in              Noted above, there has been a change in psychology for the
      expectations of old crop stocks new crop yields, and exports have    cow/calf sector. Recent dryness has raised doubts about fall forage
      had a clear impact for the cattle industry. Along with those con-    supplies. Additionally, a few of those planning to over-winter their
      cerns, drying conditions in the Plains have been added to the        calves are having second thoughts given the change in any pur-
      mix.                                                                 chased feed costs. Feeder prices are down $9 while 5-weight calves
        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
         For finished cattle prices, this past week’s trade at $108
                                                                            pull-back in feeders. If I owned a feedlot I’d be nervous to say the least.  I do feel
       placing a bullish tilt to this market for some time now.  I may need to temporarily   have fallen $6 in recent weeks.
                                                                              Given the feed cost and forage concern we may see pressure re-
      stopped a relatively easy four week advance. Cattle feeders           the feeder market has overdone it to the downside and it will be tough to break it
       place this on “hold” for a while.  The higher placements the last three months will
       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
      looking over those remaining pens of heavy cattle may be more        main on feeder/calf prices into the end of the month. For long term
       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
      willing sellers given the recent change in feed costs. On the pos-   farm/ranch planning, we would still suggest moderately higher
                                                                            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
      itive end October and November offered cattle supplies should        calf prices over the next three years based on industry contraction
                                                                            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  and slightly larger processing capacity.
      be quite manageable given low placements earlier this year. Oc-
       imports and high exports have held this market up all summer.  We’re starting to
      tober futures touched our $110 target but may end below it. We
       lose some of that.  I just can’t pull the trigger yet on long term bullish hopes.
      still look for the December to return to our $112 expectation.
                                                                                                  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: Have these feeder prices fallen enough yet? I am interested in locking these low prices in.
       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: 7-weight steers have fallen almost $9 in the past four weeks. January feeder futures, about the same.
       going to have to kick in though in order to get it.
       Given the change in feed costs and drying Plains, there may be a little more softness in the market into early
        Q #2
        Due to the recent break in feeders, would you be holding your fall-weaned
       Q: What is the right price to lift any feeder cattle hedges?
       calves for a while or letting them go?
        A: Back in August we discussed buying a $140 put for a floor and selling a $148 call to lower the initial cost
       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
        of the put. This position, using the January contract, puts a floor in but also allows for an $8 potential upside
       right now probably dictates letting them go.  If you keep them for an extra 30 days, make sure you
        in prices. With prices currently at $132 it may be enticing to take profit. Given the likelihood of higher grain
       minimize the grain in the ration.  Grow them on good forage....”sell” $4.50 corn.  If the fat market
        prices ahead we would suggest holding off for now.
       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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