Fed Cattle Caution

[errolanderson]

Reason for this note is the cattle bull
market may be showing signs of tiring.
U.S. packers have been under margin
pressure for several months now. This
week they are drawing on contract
cattle. Alberta fats gradually easing
and around $1.12/lb.

Certainly, the cattle cycle favors the
feeder, but bull markets no matter what
exhaust and when they do . . . look
out.

Feeders are making good money right now,
but the cost of replacements may be
reason to get price protected. When the
cattle board breaks, it may be a nasty
downward correction. The question is;
'when'?

Errol

[jensend]

oh crap! i thought this time was different.

[ALLFARMER]

My prediction is 2 years of strong prices at
minimum.

The beef sector can't rebound like a grain crop
could...ex canola goes to $15 guess what gets
put in the drills?

For me I have 4.5 miles if new fence to build this
summer.....not gunna happen over night.

For many years cattlemen have been losing
ground to grain producers, this trend will not
reverse with 15 months of good cattle prices.
As long as the good money in grain continues
the feedlots and packers are gunna have to pay
or they will lose numbers

[cottonpicken]

Kick the tires and light the fires,your turn cattle guys.

I got some numbers for ya but you wouldn't believe
them anyway.

You guys do remember why farms in the past had
cows?

To make *** money!

[shaney]

At the NCBA meeting last week there was defiitely a positive spin on prices going forward for the year.

Rancher is a good spot but the packer and feeder will have to maneuver with good strategies. Lots of talk at NCBA about 1400-2000 bred cows this year.

[Cattleman]

Do you think the correction will be big Errol, and for how long?

Again near term, there might be a shift for US packers, light kills, and carcass weights growing fast is a bit of a concern. Might be a correction, until a pick up in spring beef and pork demand.

In Canada though, our packers have been a little more level, and hopefully a correction in the US will be mostly absorbed in a shift in our basis!.

Feeder prices going forward still look pretty exciting though.

[errolanderson]

The Kansas/Nebraska cash developed at
$123 this aft, only down $1/cwt. That's
actually good news. Thought U.S. cash
may be down more this week. Cdn packers
very quiet and fed basis has weakened.

It the Greek crisis unravels over the
weekend, stock markets may break lower
again on Monday, triggering more
pressure on the cattle board. In my
opinion, April live cattle have heavy
resistance at $129.25 with key support
at $124.25. This is a possible range for
the correction.

But the Cdn cash may be protected from a
drop in the Cdn dollar next week.Feel
the loonie remains overvalued. This is
the good news.

Cdn fat market may be steady to only
slightly lower next week. Feeder market
will stay hot, but would suggest price
protection for those buying feeders in
the current hot market.

Errol

[errolanderson]

Cattleman . . . you mentioned 'how long' Tough call . . . an opinion; the cattle market is hot enough that it will hit some nasty roadbumps through the year, but should recover because feeders are still in-control. March beef demand should start to pickup again. So . . . cattle market sags here and recovers into March. Here's the catch . . . .

If the stock market blows, so will cattle. That's the risk. I'm very cautious about the equity world. That's why we are scaling in risk mangement strategies with feeders we deal with. Unfortunately, feeding cattle will unfortunately be a train wreck sometime ahead without price protection, but that may be weeks or months ahead.

An opinion for what its worth . . . .

Errol

[T.N.T.]

I'll bite cottonpicken,what are some of your numbers?