to sell or not to sell

[nicolaas]

I've got a few hundred feeders, about 7 to 800 weights. I know there is law suits pending in the states, but I am sort of worried that if I hold on too long the border could close to boxed beef as well. What would you guys do if you were in my shoes? I'm sort of leaning to selling them now, but the prices are not the greatest. I'd appreciate hearing some other peoples insight on the future market(may june), and not just rely on the sales barn managers view.

[15444]

Just break it all down in order to make a decision easier.

~ USDA has until April 14 to submit its brief on the injunction appeal.

~ Then R-CALF will have until May 12 to respond.

~ USDA may then take 14 days (May 26) to respond, if it so wishes.

~ The 9th Court will then make a decision as to whether or not it will accept the appeal, and set date for oral arguments, if necessary.



<u><b>Scenario #1 (Most optimistic):</b></u>
If R-CALF doesn't leave their response to the last minute, and USDA doesn't respond to R-CALF's brief, and the court accepts the appeal without oral arguments,...the earliest date for a border opening would be sometime in the last week of April or first couple weeks in May.



<u><b>However, Scenario #2 (More realistic):</b></u>
If R-CALF does leave their response to the last minute in order to stretch out the appeal process, and USDA does respond to R-CALF's brief, and the courts accept the appeal after oral arguments,...the date for a border opening would be no earlier then about mid-June. Giving us about 1 & 1/2 months before the trial to ship a whole lotta calves/yearlings across the border.

Now if the appeal is rejected, then the border is closed for good until the trial date of July 27.



<u><b>Trial: (Worst scenario)</b></u>
If R-CALF wins the trial, then you know that another injunction will be put against boxed beef, and it’s a pretty good guess, with Cebull listening, that they would be successful on that as well. Then the whole appeal/briefing/trial scenario on boxed beef will start all over again.



<u><b>Trial: (Best scenario)</b></u>
~ If R-CALF loses the case, then the border opens while USDA and R-CALF duke it out in the appeals courts. Meanwhile, hopefully Canadian Cattlemen for Free Trade are successful and suck up so much money from R-CALF that they can’t afford to go through the appeal process.

[grassfarmer]

.....Meanwhile in the real world - beef sells for high prices in stores across N.America and the packers laugh all the way to the bank.
Sorry nicolaas I'm not helping you much here. Prices are actually climbing again I see 7 weight steers quoted as high as $1.05 last week. Of course the fats are currently better too $85 as opposed to $75 after the March 7th announcement. So what's happening? is it speculation on border opening, realistic values or trying to get as many fats killed and across the line before we get shut down on boxed beef?
Hindsight says you should have moved the cattle in February.
Worst case scenario and seeing boxed beef sales stopped would bring chaos - but ultimately bring Government compensation too. Pity Government doesn't see that and spend (or lend) a little seed capital over the last 2 years to save us being in this mess now.

[nicolaas]

15444, thanks for explaining the sequence of the lawsuits to me. Maybe there will be some optimism in the marketplace in the near future. Still looks like a crap shoot though, but nothings certain in life.

[15444]

nicolaas,

I believe that the market will rally a little, if and when the USDA responds to R-CALF's brief for the appeal. It's during that time between the USDA's response and the final ruling (i.e. May to early June) that I think anyone with any ounce of optimism is going to be buying.

[farmers_son]

Nicolaas: “I'd appreciate hearing some other peoples insight on the future market (may june).”

Our present market is characterized by uncertainty. There is no insight into the market May June.

However, there is less uncertainty for feedlots carrying the calves through to fat. Once your calves reach 1200 pounds they can go on the fat cattle set aside program which guarantees your downside risk plus covers most of the feed bill but not the yardage. All indications I have suggest that program will continue. The feedlots are penciling in a generous amount for risk on feeders they buy, that gets passed down to the backgrounder. If you have to pay for the risk anyway then there is a strong incentive to keep the calves through to fat.

Backgrounders are not fully exposed to risk. Look at your CAIS reference margins. If you have any margin left that will buffer you if there is a wreck although cash flow could be real bad while waiting for CAIS to pay out as much as 1 ½ years after the fact, depending upon when the wreck comes in your fiscal year. Will your banker carry you that long? Talk to them.

Bottom line, we remain in a non functioning market making the market impossible to predict. But you can manage your risk, with the governments help.

It is my opinion that the risk of the border being closed to boxed beef is being greatly exaggerated by people on this side of the border, for political reasons. Cebull has had two opportunties to close the border to boxed beef and he has not done so. If he could have, it would have been closed by now.