Weekly update: Feb. 5, 2010

The live-cattle trade Friday morning was moderately active up north, and inactive in Kansas and Texas. USDA’s mandatory price reporting (MPR) service reported that Nebraska sold 14,903 head at $84.32/cwt. live or $137.52 dressed for a weekly total of 54,093 head. Iowa-southern Minnesota sold 6063 head at $137.18 dressed or $84.60 live for a weekly total of 33,883 head. Kansas sold 311 head for a weekly total of 5,736 head. Texas sold no cattle for a weekly total of 2,879 head. The MPR weekly totals include negotiated cash and grid sales.

Live-cattle futures closed higher. February closed up 87 points at $87.42 ($85.80 last Friday), April closed up 32 points at $90.40, June closed up 25 points at $88.10, August closed up 10 points at $87.35 and October closed up 27 points at $89.85.

The week’s cattle slaughter was an estimated 642,000 head (625,219 head the same week last year), with Friday’s kill 126,000 head and Saturday’s 27,000 head. Year-to-date FI slaughter is an estimated 3.292M head, almost the same as 2009’s 3.293M head. Hog slaughter year to date is 8.9% lower than last year.

Boxed-beef cutout values were weak on light to moderate demand and offerings. The Choice cutout declined $0.81/cwt. from the day before to $137.90/cwt. ($140.73 last Friday) while the Select cutout declined $0.64 to $135.46. The Choice-Select cutout price spread was $2.44/cwt. ($2.97 last Friday). The reported spot boxed-beef trade for the week was 891 loads of fabricated cuts, 2.6% lower than the 915 loads the week before.

Packer margins for the week were positive by $7.81/head, compared to a positive $20.20 the week before, according to HedgersEdge.com.

Projected Cattle Feeding Margin

The projected cattle-feeding margin for this week (cattle placed on Feb. 5, with an expected finish date of July 10, is a negative $7.90/head, according to the North American Institute for Beef Economic Research (NAIBER). This compared with a positive $4/head the week before. The lower and upper profit potential is a negative $171/head to a positive $150/head, vs. a negative $164 to a positive $166 the week before.

The weekly margin includes: a 750-lb. steer; its average price at Monday’s Oklahoma City Stockyards sale; a Kansas feedlot location; interest rates that reflect general cattle financing terms; seasonally adjusted expected average daily gains, death loss and other feedlot inputs; projected corn costs during the projected feeding period, using Thursday’s corn futures closes; a projected live-cattle price at the end of the feeding period, using Thursday’s live cattle futures closes; a projected outweight of 1,250 lbs.

The feeder price used in this week’s calculation was $99.56/cwt., an almost $3 increase relative to last week’s Oklahoma City price for 750-lb. yearlings of $96.75, says NAIBER’s Ted Schroeder. The higher price, together with only an 8¢/bu. decline in corn price and 48¢/cwt. increase in fed-cattle prices, reduced the expected return by nearly $12/head relative to last week, he says.

NAIBER’s risk analyzer calculates the risk associated with feeding cattle based on these and other inputs. As noted, some inputs will be updated each week while others, such as daily gain and death loss, will be adjusted on a seasonal basis. People wishing to calculate their own projected cattle feeding returns, using their own inputs, can do so by going to NAIBER’s Cattle Feeding Return Risk Analyzer at www.naiber.org/cattleriskanalyzer/

NAIBER also posts historical data and two graphs of its weekly calculations that it started in January this year. These can be found under the “expected Kansas feeding return” icon. Also available there is a link to a spreadsheet that contains some of the details of the calculated inputs.

Have a good week.
Steve Kay