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
APR 11 $124.97
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).
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
Profit: $85.45/hd less basis and commissions
Heifers, medium 1, 677# @ $117.00
Profit: $144.49/hd less basis and commissions
Heifers, medium 1, 787# @ $110.33
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!