Whats Up?

[Howdyjabo]

I can't figure out what is going on with the cattle market.
Does anyone know how feedlots are able to pay $1.05 for 850 lb calves?

I know there is a shortage of available calves with the grass boys buying the smaller stuff on top of an overall shortage of calves.
I know corn is reasonable
I know they have to have cattle or close up shop
I know the futures look good

But that all still adds up to a major loss at $1.05 on top of years of losses- is there no ceiling to the losses they can absorb?
Are they loosing money on cattle but making it on the futures like they did a few years ago?

Any guesses as to when whatever is going on is going to top out?

 

[novaman]

I wouldn't call corn reasonable at $3.50. I have no idea what's driving this market but looking at the futures, it sure sounds like a promising year.

 

[iowafarmer]

They could be playing them on the board.

 

[Douglas]

Here is some commentary showing how they are making money now.

http://www.lmic.info/memberspublic/InTh ... arket.html


Instead of losing $50-100 per head on cattle sold, as has been the case for most of 2008-09, feedlots are seeing a $50-100 pre head positive return on cattle currently being sold.

 

[bigbull338]

its like i said a few years back.now the feedlots are running out of cattle an their pens are empty.same for the stocker boys.theyve gone as long as they can without filling their pastures.so its either buy cattle or get out of the business.

 

[Howdyjabo]

I wonder if the feedlots have shifted and now there is more competition from east coast feedlots and they can push our local prices . Here It used to be the east coast lots had to pay less because their operation costs were higher. And the western lots had to pay less because of shipping.

 

[TexasBred]

"Drovers Magagine" had a good article on this very thing. Check it out.

 

[kenny thomas]

One reason they are making money now is they bought them so cheap last year. Hope it lasts but it changed too much too fast for me to be comfortable.

 

[1982vett]

Texas is green again........... :lol:

 

[kenny thomas]

A month has passed since this topic started and the 8wt's are 5 cents higher. What does everyone think now? I am going to stay current with sales as this cannot go on forever.

 

[1982vett]

Texas is green again........... :lol:

Yep, better keep current. That "is" is turning to "was" pretty fast.

 

[traderaaron]

To replace feeding inventory at a positive cash flow I could pay no more than 109 for an 850 lb. steer if I just sold a 1300# fat for $99 feeding at .80cog. I would be putting $.50 back in my pocket. Having said that we bought some thin 7 weight steers last week for 109, that's obviously a better buy.

 

[kenny thomas]

Can you lock them in now for .99 fat? Sounds like you done good getting the 7wts.

 

[Angus Cowman]

I was figuring the other day for a 6-650 wgt if you paid any more than $1.22 you would have to sell fats at $1.00

 

[traderaaron]

Can you lock them in now for .99 fat? Sounds like you done good getting the 7wts.

No, but there were cattle sold recently at 99, and 100. To replace our inventory and cover our cost of gain and maintain positive cash flow I could pay no more than 109. It's all about making the market we sold on pay for buying back new inventory and covering the cost of gain+profit. Just like any business with inventory if we get caught paying more for new inventory than we are selling current inventory for then we have a negative cash flow on the transaction and that's a loss. Think of a gas station, if they are selling current inventory at $2.65 and the next shipment is $2.75 then that money has to come from somewhere, it's a cost and a current loss.

 

[TexasBred]

Cattle feeding margins increased $36 per head last week, posting the year's largest profits to date. Packer margins increased slightly, posting solid profits for the week, according to estimates developed by Sterling Marketing Inc., Vale, Ore. The Sterling Beef Profit Quotient increased 110 points for the week.

"Estimates for feedlot feed costs, breakeven prices, and margins are generated based on the cost of a 775- pound feeder steer, and corn prices (Western Kansas) during the week the cattle were placed on feed," says John Nalivka, Sterling Marketing president.

"The days on feed for those animals and closeout week are then calculated using average data that might be expected for feeding performance, i.e. feed conversion and ADG. Breakevens and margins will vary according to differences in the cost of cattle, cost of feed, and feeding performance," Nalivka says. "While I recognize the significant differences in performance during periods of extreme stress due to weather - such as those experienced last winter - Sterling Marketing does not attempt to adjust the model accordingly. Consequently, the estimated breakeven price may seem low, while the estimated margins may seem high."

The Sterling Beef Profit Tracker is calculated using actual weekly prices for Choice fed steers, feeder steers, feed costs, boxed beef-cutout prices, hide and offal values, and other factors that influence profit margins.

The Sterling Beef Profit Tracker for the week ending May 8:

Average feedyard margins: $225.29 per head.
Average packer margins: -$66.26 per head.
Sterling Profit Quotient: 696.5.
The Sterling Beef Profit Tracker is produced by Sterling Marketing Inc. and John Nalivka, president, Vale, Ore., and is published weekly by Drovers/CattleNetwork.

 

[canadianfarmboy]

I was figuring the other day for a 6-650 wgt if you paid any more than $1.22 you would have to sell fats at $1.00

I can buy 6 weight cattle here for a buck and still not sure how i could feed them out to make money . By the time i feed , vac , haul , account for dead loss , mahcinery cost , farms costs there is nothing left . WHats everyones secret?

 

[traderaaron]

I was figuring the other day for a 6-650 wgt if you paid any more than $1.22 you would have to sell fats at $1.00

I can buy 6 weight cattle here for a buck and still not sure how i could feed them out to make money . By the time i feed , vac , haul , account for dead loss , mahcinery cost , farms costs there is nothing left . WHats everyones secret?

Maybe the secret is to be selling 600# cattle?

What's your all inclusive cost of gain plus a profit for yourself. Know what that is and then see what you can do in your markets.

In my area markets this spring folks selling 5-600# steers could buy back about anything they wanted.

 

[canadianfarmboy]

I find for my area what has been working best if buying the 600 lbs calves , little protein, mineral and some good grass until they hit 900 - 1000 lbs for the guys to feed has been working for me . I have no idea how guys are dumping feed in the cattle at a rate they do and still making money. Whats are some of your guys costs of gain from a stocker to finshed animal?

 

[traderaaron]

I find for my area what has been working best if buying the 600 lbs calves , little protein, mineral and some good grass until they hit 900 - 1000 lbs for the guys to feed has been working for me . I have no idea how guys are dumping feed in the cattle at a rate they do and still making money. Whats are some of your guys costs of gain from a stocker to finshed animal?

OKC West for an example: 600# Feeder Steers $126, 900# Feeder Steers $103.90.

At an .80 cog of gain including some profit for me:

That's 300lbs of weight and $179 dollars difference, you'd need a cost of gain below .60 to make this a cash flow positive transaction.

If you reversed this and sold the 600# steer at $126 and bought the 900# at $103.90 you would cover your cost of gain with nearly $61 left over.

Which is the better buy and which is the better sell?

Assuming the Fat Cattle market is the source of value for all classes of cattle below it then at $100 Fats and .80 cog the 900# is too cheap, the 600# too expensive.

What is overvalued and undervalued changes and capturing those changes is how to make money.