skyhightree1
Well-known member
http://www.agcenter.com/newcattlereport.aspx
September 24, 2015
CATTLE MARKET REPORT AND ANALYSIS
PLAINS MARKET TALK
The focus was the crashing cash markets in every region and across all cattle types and weights. In the fed cattle trade dressed sales started at $205 Tuesday followed by lower prices yesterday at $203 then falling to $200 bids with uncertain volumes late. Live trades were no better with a few live trades at $132 then dropping to $130. These prices were $5-10 cwt. lower. The freefall in fed cattle is matched in box prices and replacement cattle as the entire cattle complex realigns prices in a structural adjustment necessary to reinvigorate demand for beef.
Anyone operating in the commodity markets for any period of time understands the "give up" mode. This is the feature characterization of the current market and it occurs when the owner of the position has given up hope for a positive outcome and is prepared to accept the miserable worst. This is generally a necessary condition to a market finding a bottom. The seller in this case is prepared to take the first bid because they are conditioned to believe the next bid will be lower.
Last week's 576,000 head slaughter was 7000 head more than last year and too many cattle for this market to absorb. Both cash and boxed beef prices are falling as fast as the live cattle trade. Sellers took the first bid they received and many sales carried overweight and YG discounts. Some of those cattle are moving south to plants in Kansas where more disciplined feeders are relatively current.
Box prices fell $4 for the choice cut out and $3 for the select as retailers exact their toll on the processors. Processor margins regain extremely good in spite of the fall in box prices because their live cattle costs are dropping as fast or faster than box prices. Lower prices always will encourage and stimulate demand. Retailers will be blending spot purchases with forward bought beef that will come at much higher prices. More choice product has narrowed the choice/select spread. The choice cut out fell $4 to $218 and select to $213 leaving the spread at $5.
News of the cash trade in fed cattle, limit down movement in feeder futures, and a general panic mode in buying caused many feedlots to pull out of the replacement market. Auction markets struggled to hold any semblance of order in prices with prices plummeting. Some grazers across the country were watching the clock winding down the summer grass season and left with unhedged unsold yearlings. Bankers were also getting involved in some decision making.
Corn moved higher in mid week trading. Harvest is between 10-15% complete and in mid stream on the southern plains. The corn basis in Guymon, Oklahoma is currently quoted at +$.40 over the September contract. Corn is now pricing into rations at $7.40 cwt. in the Oklahoma Panhandle.
MARKET PSYCHOLOGY
Some traders and cattle owners would like to reduce price expectations to pure math. The answer is found simply in the numbers. This group falls into two categories -- the technicians and the fundamentalist. The technicians watch the charts for trend patterns and repeated price patterns from previous periods of time in the beef business and draw conclusions based on those patterns. Each move is scrutinized for price triggers for entry or exit. The fundamentalist look at the mountains of market data much of which is provided by the government in daily, weekly and monthly reports of cattle numbers. Those numbers guide their actions. They rely on those numbers to make their forecast and decisions about when to buy or sell.
A different school of trading and price forecasting is the intuitive trader. He/she are the ones who spend much of the day on the phone -- talking to people and getting a feel for the market. They develop trust relationships with others they know well and rely on information coming from those trusted sources. These folks are street smart and above all wary. They are wary of information provided by some people operating in the cattle space and are constantly questioning the motives of the person volunteering information. They sometimes see conspiracies among competitors and at other times they see market manipulation.
It takes all types to make a market and prices are under the influence of both the "by the numbers" and "by the gut" types. No one has a patent on the correct way to trade and no one is invulnerable to error or bad judgment. But rising above all the various methodologies and theories and practices of trading is market psychology. Market psychology is a force that can trump all trading strategies and price forecasts. This is the point in a market when reason moves to the back burner and emotion takes over. This is the force that causes markets to overreact and extend prices beyond reasonable supply/demand price points.
Fear can be the driver in many of the decisions made in the midst of emotion driven markets. It matters little if the direction of the market is up or down, the fear of being wrong and the abandonment of a position can be mean and ugly. People can only fight a position so long until eventually either financial pressures or mental pressures force a capitulation. The same behavior and price patterns are not limited to cattle markets but are found in all markets. There is no way to predict how long these periods will last. Markets that over-react will eventually rebalance and once again supply/demand patterns will govern.
FURTHER NOTES AND EXPLANATIONS OF BREAKEVEN/CLOSE OUT TABLES
Readers have been sending notes regarding breakeven projections. One commenter ask how we could use 80 cents for a cost of gain when everyone knows that is too low. Another ask why we are using such a high cost of gain number. The two emails illustrate the difficulty of providing one benchmark for all regions of the country. Currently a typical bases in the corn belt might be $1 under the futures and alternatively a corn basis in Hereford, Texas might be $1 over the futures. The northern feeders have much cheaper grain and more expensive feeder cattle. A more meaningful report would include one breakeven and close out for each major region. It also is difficult maintaining the tables when both fed and replacement prices are changing in $5-10 cwt. price blocks.
CURRENT BREAKEVEN PROJECTION
The Cattle Report introduces the FEEDER METER. The report estimates profit or loss for currently purchased feeder steers and projects a result 150 days out. The chart is interactive and updated every 15 minutes in real time based on changes in futures markets in grain and cattle. Corn basis information is based on current trade prices adjusted every two weeks. Feeder prices and fed cattle sales are par the appropriate futures contract.
INPUTS TOTAL$ $CWT
750 # Feeder Steer 1,456.73 194.23
Cost of Gain 600 pounds 484.90 0.81
Estimated Interest(Prime + 1%) 34.82
Current Breakeven 1,971.66 146.05
Current Futures 1,817.51 134.63
Net Profit / Loss -154.16 -11.42
CURRENT CLOSE OUT
The Cattle Report estimates current profit or loss on cattle placed on feed 150 days ago. This report generated from industry averages attempts to simulate a typical close out based on prevailing purchase prices for a feeder steer 150 days ago. The close out assumes grain was purchased at market each month. Selling prices and interest rates are based on prevailing benchmark quoted prices. This chart will change weekly.
INPUTS TOTAL$ $CWT
750 # Feeder Steer OKC 150 days ago 1,665.00 222.00
Cost of Gain 600 pounds 517.84 0.86
Estimated Interest(Prime + 1%) 33.60
Resulting Breakeven 2,216.44 164.18
Current Texas Panhandle Cash 1,833.71 135.83
Net Profit / Loss -382.74 -28.35
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September 24, 2015
CATTLE MARKET REPORT AND ANALYSIS
PLAINS MARKET TALK
The focus was the crashing cash markets in every region and across all cattle types and weights. In the fed cattle trade dressed sales started at $205 Tuesday followed by lower prices yesterday at $203 then falling to $200 bids with uncertain volumes late. Live trades were no better with a few live trades at $132 then dropping to $130. These prices were $5-10 cwt. lower. The freefall in fed cattle is matched in box prices and replacement cattle as the entire cattle complex realigns prices in a structural adjustment necessary to reinvigorate demand for beef.
Anyone operating in the commodity markets for any period of time understands the "give up" mode. This is the feature characterization of the current market and it occurs when the owner of the position has given up hope for a positive outcome and is prepared to accept the miserable worst. This is generally a necessary condition to a market finding a bottom. The seller in this case is prepared to take the first bid because they are conditioned to believe the next bid will be lower.
Last week's 576,000 head slaughter was 7000 head more than last year and too many cattle for this market to absorb. Both cash and boxed beef prices are falling as fast as the live cattle trade. Sellers took the first bid they received and many sales carried overweight and YG discounts. Some of those cattle are moving south to plants in Kansas where more disciplined feeders are relatively current.
Box prices fell $4 for the choice cut out and $3 for the select as retailers exact their toll on the processors. Processor margins regain extremely good in spite of the fall in box prices because their live cattle costs are dropping as fast or faster than box prices. Lower prices always will encourage and stimulate demand. Retailers will be blending spot purchases with forward bought beef that will come at much higher prices. More choice product has narrowed the choice/select spread. The choice cut out fell $4 to $218 and select to $213 leaving the spread at $5.
News of the cash trade in fed cattle, limit down movement in feeder futures, and a general panic mode in buying caused many feedlots to pull out of the replacement market. Auction markets struggled to hold any semblance of order in prices with prices plummeting. Some grazers across the country were watching the clock winding down the summer grass season and left with unhedged unsold yearlings. Bankers were also getting involved in some decision making.
Corn moved higher in mid week trading. Harvest is between 10-15% complete and in mid stream on the southern plains. The corn basis in Guymon, Oklahoma is currently quoted at +$.40 over the September contract. Corn is now pricing into rations at $7.40 cwt. in the Oklahoma Panhandle.
MARKET PSYCHOLOGY
Some traders and cattle owners would like to reduce price expectations to pure math. The answer is found simply in the numbers. This group falls into two categories -- the technicians and the fundamentalist. The technicians watch the charts for trend patterns and repeated price patterns from previous periods of time in the beef business and draw conclusions based on those patterns. Each move is scrutinized for price triggers for entry or exit. The fundamentalist look at the mountains of market data much of which is provided by the government in daily, weekly and monthly reports of cattle numbers. Those numbers guide their actions. They rely on those numbers to make their forecast and decisions about when to buy or sell.
A different school of trading and price forecasting is the intuitive trader. He/she are the ones who spend much of the day on the phone -- talking to people and getting a feel for the market. They develop trust relationships with others they know well and rely on information coming from those trusted sources. These folks are street smart and above all wary. They are wary of information provided by some people operating in the cattle space and are constantly questioning the motives of the person volunteering information. They sometimes see conspiracies among competitors and at other times they see market manipulation.
It takes all types to make a market and prices are under the influence of both the "by the numbers" and "by the gut" types. No one has a patent on the correct way to trade and no one is invulnerable to error or bad judgment. But rising above all the various methodologies and theories and practices of trading is market psychology. Market psychology is a force that can trump all trading strategies and price forecasts. This is the point in a market when reason moves to the back burner and emotion takes over. This is the force that causes markets to overreact and extend prices beyond reasonable supply/demand price points.
Fear can be the driver in many of the decisions made in the midst of emotion driven markets. It matters little if the direction of the market is up or down, the fear of being wrong and the abandonment of a position can be mean and ugly. People can only fight a position so long until eventually either financial pressures or mental pressures force a capitulation. The same behavior and price patterns are not limited to cattle markets but are found in all markets. There is no way to predict how long these periods will last. Markets that over-react will eventually rebalance and once again supply/demand patterns will govern.
FURTHER NOTES AND EXPLANATIONS OF BREAKEVEN/CLOSE OUT TABLES
Readers have been sending notes regarding breakeven projections. One commenter ask how we could use 80 cents for a cost of gain when everyone knows that is too low. Another ask why we are using such a high cost of gain number. The two emails illustrate the difficulty of providing one benchmark for all regions of the country. Currently a typical bases in the corn belt might be $1 under the futures and alternatively a corn basis in Hereford, Texas might be $1 over the futures. The northern feeders have much cheaper grain and more expensive feeder cattle. A more meaningful report would include one breakeven and close out for each major region. It also is difficult maintaining the tables when both fed and replacement prices are changing in $5-10 cwt. price blocks.
CURRENT BREAKEVEN PROJECTION
The Cattle Report introduces the FEEDER METER. The report estimates profit or loss for currently purchased feeder steers and projects a result 150 days out. The chart is interactive and updated every 15 minutes in real time based on changes in futures markets in grain and cattle. Corn basis information is based on current trade prices adjusted every two weeks. Feeder prices and fed cattle sales are par the appropriate futures contract.
INPUTS TOTAL$ $CWT
750 # Feeder Steer 1,456.73 194.23
Cost of Gain 600 pounds 484.90 0.81
Estimated Interest(Prime + 1%) 34.82
Current Breakeven 1,971.66 146.05
Current Futures 1,817.51 134.63
Net Profit / Loss -154.16 -11.42
CURRENT CLOSE OUT
The Cattle Report estimates current profit or loss on cattle placed on feed 150 days ago. This report generated from industry averages attempts to simulate a typical close out based on prevailing purchase prices for a feeder steer 150 days ago. The close out assumes grain was purchased at market each month. Selling prices and interest rates are based on prevailing benchmark quoted prices. This chart will change weekly.
INPUTS TOTAL$ $CWT
750 # Feeder Steer OKC 150 days ago 1,665.00 222.00
Cost of Gain 600 pounds 517.84 0.86
Estimated Interest(Prime + 1%) 33.60
Resulting Breakeven 2,216.44 164.18
Current Texas Panhandle Cash 1,833.71 135.83
Net Profit / Loss -382.74 -28.35
Click here to "Check out the markets "
Click Here to send your comments
