Weekly Feeder Cattle Risk Management Analysis

February 8, 2011 06:35 AM
 

chart02042011

Click here to see a full-sized version of the chart, or click on the chart above.

Weekly USDA feeder cattle prices for Texas and Oklahoma were used to calculate projected breakevens on cattle bought last week, week ending February 4, 2011.

Breakevens were calculated for each weight group within sex (steer and heifer).  Ration price, $/ton dry matter basis, 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. 

Weather affected auctions the first week of February.  As storms slowed feeder movement from Texas through the Great Lakes region, reported prices were generally softer.  The live cattle futures market posted slight gains of approximately $1.00/cwt from the previous week.  Given this, the breakeven estimates did not change dramatically from previous estimates as weather remains troublesome for early February placements.    

Below is an analysis of heifer value relative to steers.  The question addressed:  Is the cash discount applied to heifer feeder cattle too wide or narrow?  As can be seen, with performance accounted for, the discount applied to heifers is often larger than what should be applied in the cash market.

chart202022011

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