Thursday, December 30, 2010

This Week In Cattle

It's been awhile since we've looked at the markets and for good reason...not much has changed since the last time we looked at them.

Oh yes, the prices have moved drastically, but the profit relationships haven't changed all that much, especially on backgrounded calves. If you have ranch calves that you didn't sell in NOV and decided to put a few extra pounds on to sell after the first of the year, you scored, BIG TIME.

Good for you, but don't get greedy. Most of these calves probably have little if any price protection on them so take the profit while you can get it. The prices on feeders that we are seeing in the cash and futures market now could fall just as fast as they've climbed.

I'm not really sure why we are seeing the price levels we are seeing in the feeder market right now considering that I see little profit in the fat market, even at $112.00 on the APR 11 and $109.00 on the JUN 11.

5 wt. steers bought today to be sold on the JUN 11 are looking at breakeven to losses of $50+ on the cash and maybe +$20-$30 or so on the grid, maybe a little more if they are Verified. Heifers look breakeven to +$50 or so on the cash and +$50 and better on the grid.

So, not peanuts by any means, but not outlandish either.

But no mind...we don't make the rules, we just find the inefficiencies and capitalize on them.

Here is what I see in the backgroundign world right now...

Steers, medium 1, 565# @ $141.91
This is ridiculous, these are money losers you probably don't want right now unless you are going to finish them out.
Steers, medium 1, 666# @ $126.80
DOF 120
ADG 2#/day
COG $0.65/lb
APR 11 $124.97
Breakeven: $110.00
Profit: $78.38/hd less basis and commissions

Steers, medium 1, 783# @ $122.14 (notice the $15.11 spread between 5 and 6 and the $4.66 spread between 6 and 7).
DOF 120
ADG 2#/day
COG $0.65
Breakeven: $109.00
Profit: $112.30/hd less basis and commissions

That's better but the girls are still the better buy for the money...

Heifers, medium 1, 562# @ $125.95
DOF 120
ADG 2#/day
COG $0.65
Breakeven: $108.00
Profit: $85.45/hd less basis and commissions

Heifers, medium 1, 677# @ $117.00
DOF 120
ADG 2#/day
COG $0.65
Breakeven: $103.00
Profit: $144.49/hd less basis and commissions

Heifers, medium 1, 787# @ $110.33
DOF 120
ADG 2#/day
COG $0.65
Breakeven: $99.00
Profit: $196.58/hd less basis and commissions

So there you have it, that is about what we have seen all summer and fall and not much has changed really.

One thing to be very careful of however, is basis. As the futures market gets higher, basis tends to get wider. Right now we are seeing basis of $3.50 - $5.00/cwt. depending on where you are at. So when you see the big profits coming in on some of these cattle, it is not quite as rosy as it may seem because the basis has widened considerably compared to this summer and fall and it may widen more as we go along.

Basis is a very hard thinng to predict or even make an educated guess at. Just be aware that basis is having a much greater impact right now than it normally does and the magnitude of the impact depends somewhat on where youa re.

Thank you and have a great day!

Monday, December 27, 2010

The New Year

First of all, I must apologize for disappearing for about a month and a half. The end of November and all of December have been out of control in terms of being busy with the end of the academic semester, a larger than normal demand for speaking engagements, the holiday season, and preparing for the annual voyage to South America.

That being said, we have a lot to catch up on, namely, the trip to Argentina that casts off next week. A little bit of background on this trip: the trip is a study-tour of South American agriculture and is offered to undergraduate and graduate students at SDSU. The main objectives are to engage our South American counterparts in discussions about the development or more correctly, the re-development of agriculture in the lower half of the continent.

A brief history: around the late-1800's and early 1900's, lower South America, mostly Argentina had one of the most robust agricultural economies in the world which, summarily collapsed following WWII. It has only been since the middle 1980's that these countries have seen a resurgence in agricultural development. Flip forward to 2007 and following the collapse of the AR Peso in 2002, Argentina's ag economy is beginning to take off again and SDSU decides that a study tour of the region should be organized.

So, this 5th group of students that are travelling to Argentina next week with me will get exposure to the advantages and disadvantages of globalized agriculture. Now I am sure you are thinking, why not Brazil? Well, we have gone to Brazil, Chile, Uruaguay, and Paraguay in the past but for logistical reasons, I have focused more on Argentina in the past couple of years. Furthermore, I try to mix it up a bit just to add some variety to the trip. Brazil is an incredible place to visit, but getting 20 visas at the 11th hour has not done much for the color or the amount of hair I have on my head. But Brazil will certainly be on the table for the 2012 trip.

In any event, we will be in Argentina and Uruguay for the next couple of weeks and my hope is to keep you all updated on our progress and let you know a little bit about what we have been touring. Hopefully this will dovetail into the visit I got from the CREA group in August. And yes, we will be visiting a lot of the folks that came to South Dakota.

Thank you and Have a Great Day!!