Weekly update: Nov. 6, 2009

The live-cattle trade Friday morning was fairly quiet. USDA’s mandatory price reporting (MPR) service reported that Nebraska sold 1,139 head at $85/cwt. live or $131.66 dressed for a weekly total of 45,565 head. Iowa-southern Minnesota sold 866 head at $135.29 for a weekly total of 29,961 head. Kansas sold 132 head for a weekly total of 27,025 head. Texas sold 1,368 head at $87.03 for a weekly total of 19,592 head. The MPR weekly totals include negotiated cash and grid sales.

Live-cattle futures all closed lower. December closed down 135 points at $85.00 ($85.67 last Friday), February closed down 95 points at $86.27, April closed down 72 points at $89.00, June closed down 55 points at $85.85 and August closed down 40 points at $85.75.

The week’s cattle slaughter was an estimated 629,000 head (624,000 head the same week last year), with Friday’s kill 118,000 head and Saturday’s 21,000 head. Year-to-date FI slaughter is an estimated 28.119M head, 4.2% lower than 2008’s 29.344M head. Hog slaughter year to date is 2.9% lower than last year.

Boxed beef cutout values were weak on light to moderate demand and moderate to heavy offerings. The Choice cutout declined $0.55/cwt. from the day before to $140.78/cwt. ($140.83 last Friday) while the Select cutout declined $0.32 to $135.44. The Choice-Select cutout price spread was $5.34/cwt. ($5.45 last Friday). The reported spot boxed beef trade for the week was 855 loads of fabricated cuts, 5.0% higher than the 814 loads the week before.

Packer margins for the week were negative by $18.33/head, compared to a negative $1.32 the week before, according to HedgersEdge.com.

Projected Cattle Feeding Margin

The projected cattle feeding margin for this week (cattle placed on Nov. 6, with an expected finish date of April 17, 2010, is a positive $40.44/head, according to the North American Institute for Beef Economic Research (NAIBER). That compared with a positive $39.45/head the week before. The lower and upper profit potential is a negative $144/head to a positive $224/head, vs. a negative $145 to a positive $220 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.

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/

Have a good week,
Steve Kay