Weekly Feeder Cattle Risk Management Analysis

March 23, 2011 03:18 AM
 

wkly03182011

Weekly USDA feeder cattle prices for TX and OK were used to calculate projected breakevens on cattle bought last week, week ending March 18, 2011.  Breakevens 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 was to illustrate pricing differentials between weight classes and sexes of cattle. 

 

Last week’s markets, both futures and cash, were dominated by fear and panic over the environmental events that affected Japan throughout the week. The majority of commodity futures markets traded substantially lower through Wednesday and cash feeder cattle prices were lower; however, by the end of the week the futures markets regrouped and rallied quite impressively. This was most evident in the corn market which rallied $0.75 Thursday and Friday. 

Feeder cattle cash prices ended the week mixed, with cattle prepped for finishing operations were lower, whereas those cattle suited for turnout on grass ended higher on the week.  Overall, average USDA feeder cattle prices in TX and OK were higher than the week before.  Live cattle trades was $4.00/cwt lower, again citing issues originating in Japan, but boxed beef prices remained high. 

There appears to be no improvement for breakevens on cattle entering the feedyard last week, feeder cattle and corn prices keep input costs above prices that can be hedged in the futures market. 

 

 

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