The grain markets dominated trade discussions for the week ending July 1, 2011. The USDA released its quarterly planted acreage and grain stocks reports.
Both reports were full of surprises as planted acreage for corn was much higher than expected and ending corn stocks were also above trade expectations. As such, the grain markets ended the week approximately $0.35/bu. lower (basis December 2011). With all of that discussion, little headway was made in cheapening ration costs as grains and other commodities remain expensive.
Concerning the cattle markets, demand for feeder weight cattle is extremely high. The lack of feeder cattle numbers is starting to become commonplace in the market discussions and bullish sentiment for the fall of 2011 and spring of 2012 fuels this demand. Although the opportunity to hedge in a break-even remains elusive, cattle feeders are implementing strategies to leave their upside potential open while setting in a floor price.
Weekly USDA feeder cattle prices for TX and OK were used to calculate projected break evens on cattle bought last week, week ending July 1, 2011. Break evens 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 is to illustrate pricing differentials between weight classes and sexes of cattle.