Fall cattle prices?

[grassfarmer]

Anyone here with a better understanding than me of futures, basis, exchange rates etc care to predict where you think fat cattle prices will be in the August - October time period? With or without the US border open to UTM cattle?
I'm trying to figure out how cheap/dear these 800lb calves are at @$1-$1.05.
BFW - what are feedlots basing their purchases on in terms of expected finished prices and summertime cost of gain?

[BFW]

Grassfarmer, I wonder at times how feedlots calculate what they can pay for feeders and can really only tell you how I would figure what I would expect to pay. If we use your example of 8 weights (we will assume a purchase weight of 850 pounds, a delivered cost of $1.05/lb., a cost of gain of $0.55/lb, and a finished weight of 1350 lb.) we arrive at a breakeven price of 0f $0.865/lb or about where the fat cattle market is trading today in Alberta. I would expect that good quality steers of this weight should market on average sometime in late June to early July. The only tool we have right now is to base our price expectations of the the June future markets which represents the expected value for fed steers basis a delivery point in the US for cattle of a certain grade and weight specification. Currently this price is about$82.00/cwt US. This price in Canadian dollars equates to about $99.25/cwt using current exchange rates and obviously we must subtract the "basis" to determine an Alberta price and this is where it gets interesting. Currently the basis (Alberta to US cash) is in the 22.00-23.00 range which would equate to a June fat price of $76.00-$77.00 in th above example and putting the cattle in a significant loss position. Apparently feeder cattle buyers are anticipating an open border and the basis to be much narrower than this. Typically under more normal (old) circimstances we would have anticipated the basis to be int the 9-12 dollar range making these current feeder cattle prices look much better. I think that it is prudent to make your buying or selling decisions on the assumption that the basis will be wider than traditionally even when the border opens and that even if the border remains closed the combination of government programs and increased slaughter capacity will keep the basis from returning to the extreme levels we have at times seen over the past 20 months. Hope this helps.

[farmers_son]

At some point since May 20 feedlots have had time to adjust to BSE. I think it is optimistic to factor in continued government programs for feedlots if the border remains closed unless they are considering CAIS. I was not expecting any significant slaughter capacity to come onstream until well after the June/July period the example calves would be fitting into.

For my calves on feed I am forecasting a range somewhere between a loss of $8 if the border does not open and a profit of $175 a head if it does. The price of barley is still trending down which should see feeders continue to strengthen. There is a lot of feed wheat around which should see pressure remain on feed prices. I see the futures are about the same price they were before the announcement of the USDA rule and the expected opening date of March 7. Difficult to read if that means the border opening to our live cattle is not expected to impact the U.S. market or that the market does not expect the border to open.

[grassfarmer]

Thanks guys, I'm really trying to guess what my backgrounding calves will be worth if I put them into a custom feedlot versus selling as feeders. I plan to feed them until Mid March here before moving them out so the 850lbs would be a March weight not a January one which is why I was asking for an August onwards price prediction.
I want to believe in retained ownership of calves through to slaughter but if it means the custom feedlot makes a guaranteed profit (maybe not a huge one)on my calves by charging so much to fatten them that I make less money than selling them as feeders why would I be interested in the deal?
I know there is the argument of benefitting from your good genetics but I see many feedlots are setting a minimum # of 100 animals to retain ownership on. If you have less you can still send the calves and buy a share in the pen to reflect that number - but how fair is that? I would be particularily concerned if the feedlot put some of their own cattle in with mine and they happened to be a lot greener or less efficient convertors. It's a complicated business, no wonder a lot of guys just sell calves in the fall.