From Drovers - Record number of cattle-on-feed

[dun]

Record number of cattle-on-feed
January 1 U.S. cattle-on-feed was record large at 12.099 million head, according to the U.S. Department of Agriculture. The January cattle-on-feed was 101 percent of a year ago, up more than 120,000 head, and more than one million head larger than the 10-year average. Marketings were pegged at one percent above last year at 1.645 million. Placements, at 1.701 million, were down one percent compared to 2007.
Analysts say the report shows ample numbers of fed cattle will be marketed during the first half of 2008. Total meat supplies are projected to be record large, and with the American economy softening, beef demand could weaken. However, winter weather can always influence prices for harvest-ready cattle.

And another:


Prices for feeder cattle and calves had seen a steady decline since September, and the markets have shown further weakness since the calendar turned to 2008. Continued concern over increasing cost of gains drove yearling prices more than $2 per hundredweight lower during the third week of January. But a 50-cent correction in last week’s corn markets helped spur gains in the feeder cattle markets.
Prices for feeder cattle and calves typically increase from January through spring green-up. If this year proves to be an exception, rising grain prices will likely be the reason.
Steer calves weighing 450 pounds sold at auction last week for an average of about $123 per hundredweight, while yearling steers weighing 750 pounds averaged about $96.50 per hundredweight. Since September, yearling steer prices have declined nearly 15 percent, from an average of about $114 to last week’s $96.50 per hundredweight.
The biggest factor pushing yearling prices lower is the significant increase in the cost of feeding cattle. Analysts claim cattle placed on feed this week will have a total cost of gain near $100 per hundredweight. Cattle coming out of feedyards are currently losing nearly $100 per head, and replacement cattle bought at $95 per hundredweight are projected to lose $20 to $30 per head when gauged against the deferred live-cattle futures contracts.

 

[dyates]

Our prices started back upward this week. I hope its not a fluke. However, they still have a way to go. Price declines here have been steeper than those in your post. I think 7 weight steers averaged around .89/lb last week.

 

[novatech]

If feedlots are full the demand goes down, thus the price for feeders goes down. When they need to be replaced I hope the price goes back up. If the feed lots can still make a profit and stay in business.

 

[tom4018]

Something that worries me is how can they continue to lose that much per head? I would not think any one could survive losing money on their product. Makes me think I should have gotten out while the prices were good. Several people in my area have went into the CREP program, lots of cattle been sold because of it here.

 

[Stocker Steve]

Something that worries me is how can they continue to lose that much per head? I would not think any one could survive losing money on their product.

Lots of folks keep doing what they have always have done until they are out of money. Since the feeder prices are really dropping I assume the equity is about gone for some higher cost operators.

Averages are confusing. The cost of gain for some folks is still in the $0.60 to $0.90 per pound range. So if you can buy feeders for almost the same price per pound as fats, then these lower cost folks are still making a modest profit and can ride this out.

Has anyone recently run the numbers on buying 6 or 7 weights and putting 250 pounds on them?

 

[larryshoat]

I raise most of my feed so, even though corn is high if the cattle can bring in a resonable profit above feed cost I figure I'm still dollars ahead over just selling the corn. I know in areas that don't raise corn it's a different ballgame. I have just about everything either hedged or contracted. I think this thing could do just about anything.

Larry

 

[mnmtranching]

I sold half of my calves in Oct, thinking, use the money to buy feed for the rest. Well I got the same price per head for the 500 weights in Oct as I recently got for 700 weights. Now that's how to make money. :cowboy: Mostly I think it's the feed costs. Calves in our area were 1.30 in Oct now 90's for the 5 weights.

 

[George Monk]

what I find interesting in this is the record number of cattle on feed. I think that this is a small down turn that will be corrected by tight numbers. Record numbers probably mean more heifers are going to slaughter and less being retained. Cow numbers are low, right? :?: Doesn't that mean that supplies will be short this fall and next spring? or is this just the beginning of a vicious cylce?

 

[iowafarmer]

Yeah the only reason the feeder market has held in there is becasue fat cattle are over a $1.00 a lb. a year from now other wise they would really be low. Corn prices have gone through the roof which makes feeder prices go down casue nobody wants to pour $5.00 corn into a feeder and only get .90 cents a pound back at top dollar for a fat. Holstien feeders have been hit the worse brionging .60 cents a pound as 500lb. feeder steers but x-cross bred feeders have stayed in the .90s and up to $1.20 for top quality . Also buyers are getting really picky in wanting only blacks and if there is to much white they will kick them off. They want them to be vaccinated twice and have colostrum to keep them from over eating and for them to be castrated and dehorned to get better money.

 

[somn]

colostrum to keep them from over eating

How did you make the connection that colostrum will prevent overeating? That is a new one on me never heard of that before.

 

[iowafarmer]

Colostrum u give under the skin its a shot it doesn't keep them from over eating it keeps the toxins from building up and them dying after over eating. Not to be mixed up with clostridium which is in a mothers first milk.

 

[larryshoat]

Colostrum u give under the skin its a shot it doesn't keep them from over eating it keeps the toxins from building up and them dying after over eating. Not to be mixed up with clostridium which is in a mothers first milk.

You've got the two switched . Hey,it happens . :?

Larry

 

[iowafarmer]

oops srry i mixed those 2 up they jsut sound the same in your head especially when you deal with both. We give tehm a shot of clostridium. vision 7 to be precise. That was my bad there.

 

[Caustic Burno]

Let a full blown recession hit like in the late 70's and a whole bunch of people are not going to be happy with the correction the market makes. The first thing to leave the table will be beef.

 

[MoGal]

Your absolutely right Caustic..... Mike Whitney has an article over on ICH and major banks have a negative reserve, basically meaning they are broke. Prices will go down in 2008 but look out for 2009........ 2009 will be awful. I saw where China is adding 30% cost to their exported wheat....... look for wheat to go out of sight this summer. They say grains will be at a devastating worldwide shortage in 2009. So grain prices aren't going down until they stop subsidizing ethanol.

But not to worry, the packers will be happy to import that cheap south american beef so that US farmers can go belly up!

 

[larryshoat]

Your absolutely right Caustic..... Mike Whitney has an article over on ICH and major banks have a negative reserve, basically meaning they are broke. Prices will go down in 2008 but look out for 2009........ 2009 will be awful. I saw where China is adding 30% cost to their exported wheat....... look for wheat to go out of sight this summer. They say grains will be at a devastating worldwide shortage in 2009. So grain prices aren't going down until they stop subsidizing ethanol.

But not to worry, the packers will be happy to import that cheap south american beef so that US farmers can go belly up!

All so very true .

Larry

 

[Caustic Burno]

Your absolutely right Caustic..... Mike Whitney has an article over on ICH and major banks have a negative reserve, basically meaning they are broke. Prices will go down in 2008 but look out for 2009........ 2009 will be awful. I saw where China is adding 30% cost to their exported wheat....... look for wheat to go out of sight this summer. They say grains will be at a devastating worldwide shortage in 2009. So grain prices aren't going down until they stop subsidizing ethanol.

But not to worry, the packers will be happy to import that cheap south american beef so that US farmers can go belly up!

All so very true .

Larry

Well for those that make it will be a lot of equipment to pick up cheap. Not near as many post to read.
My crystal ball is not very good but from what I have seen in the past. With as weak as the American dollar is, the last time we saw this the bottom fell out of cattle for several years.

 

[Stocker Steve]

How does a weak dollar hurt US beef prices? I would think that we would export more beef or import less beef if the relative cost is lower.

 

[Caustic Burno]

How does a weak dollar hurt US beef prices? I would think that we would export more beef or import less beef if the relative cost is lower.

It will put us in recession as we are pumping our money into Asia and the Middle East for our products.
The weaker the dollar the more inflation will be and have to pump more dollars overseas for the same products. Americans have less spendable dollars here. Then the recession comes and there is even less dollars to be spent.

 

[MikeC]

Who's Afraid of a Falling Dollar?
by Mark Weisbrot
November 12, 2007



What do policy-makers in China, Japan, Argentina, Malaysia, Indonesia, the European Union and many other countries understand that ours don't? It seems they know that if the value of their currencies rises too much, it can hurt their economy. But for a number of reasons it hasn't quite sunk in here.



Which is too bad, because we've lost more than three million manufacturing jobs in the U.S. since 2001, and much if not most of this job loss is due to the dollar being overvalued. This is bad news not only for the people who lost those jobs, but for the tens of millions more whose wages are depressed by the displacement of these workers - and arguably for the nation as a whole, as America's manufacturing base continues its process of "hollowing out."



Perhaps most amazing is that now that the dollar is finally falling - it has dropped by 23 percent against a trade-weighted basket of currencies since February 2002 -- we hear warnings from prominent citizens and government officials that this is something we should be worried about. Just last week, former Treasury Secretary Robert Rubin, reacting to the dollar's recent fall, said that relying on a weaker dollar to boost growth isn't a "sound approach."



"Our objective ought to be to have a strong currency based on sound policy," he said.



On the same day U.S. Treasury Secretary Henry Paulson said, "I am strongly committed to a strong dollar."



Comments like these simply reinforce the popular misunderstanding that a "strong dollar" is good for the country. But an overvalued dollar makes imports artificially cheap, and prices US exports out of foreign markets. If the dollar is 25 percent overvalued, that's the same as putting a tariff of 25 percent on U.S exports, and at the same time giving a 20 percent subsidy to foreign manufacturers exporting to the U.S. market. This handicap has probably had as much impact on the loss of manufacturing jobs in the U.S. as trade agreements such as NAFTA, which were designed to facilitate the movement of US manufacturing to countries with cheap labor and lax environmental regulation.



It is because of many years of overvaluation that we have run up an enormous trade (and current account) deficit, borrowing from the rest of the world at an unsustainable pace. This borrowing will have to slow, and the way this will happen is through an adjustment in the dollar. This will reduce our imports and increase exports. In fact, it appears to be beginning already, as a result of the dollar's decline: Exports of goods rose by a 23 percent annual rate in the third quarter of this year, the fastest such jump since 1989.



That is the purpose of a flexible exchange rate: it adjusts to move your trade back towards balance. Our trade doesn't have to be balanced, but the deficits can't be so large as to pile up an explosive foreign debt.



The alternative to reducing the trade deficit through the dollar falling is to have a serious recession, which reduces spending on imports. This is a much uglier process, and one of the main reasons why the world long ago abandoned the gold standard.



Like most bad policy, there's a conflict of interest underlying the resistance to having the dollar move to a more competitive level. Robert Rubin is now Chairman of Citigroup. (Both Rubin and Paulson are former CEO's of Goldman-Sachs). The big bankers and the financial sector generally do not have much interest in promoting growth and high levels of employment in the domestic economy, and certainly not rising wages. For them, inflation is the only real enemy, since it erodes the value of financial assets. (Rising wages are viewed negatively by these people because wage increases are seen as increasing inflationary pressures).



If you read the business press you might have noticed that when unemployment goes up, the bond market generally rallies. That is a reflection of the financial sector's direct interest in lower inflation and lower wage growth even if it hurts the vast majority of the country. A high, even overvalued, dollar helps hold inflation in check by keeping import prices lower. On the flip side, as the dollar adjusts to a more sustainable level, at least some increase in inflation is inevitable as import prices increase.



Some of our big transnational corporations also like a high dollar because it makes everything they buy overseas - including other companies as well as labor - cheaper for them. And of course for those whose first priority is an affordable vacation in Europe - well they are out of luck when the Euro rises, as it has now, to $1.45.



But for the vast majority of the country, a "strong dollar" is more like a "strong influenza virus" - something to be avoided whenever possible.





Mark Weisbrot is Co-Director of the Center for Economic and Policy Research. He received his Ph.D. in economics from the University of Michigan. He is co-author, with Dean Baker, of Social Security: The Phony Crisis (University of Chicago Press, 2000), and has written numerous research papers on economic policy. He is also president of Just Foreign Policy.