Emmit Rawls
May 9, 2008
BEEF CATTLE: Fed cattle began trading in the North at $92.50 and $147 to $150 on Thursday. With the sharply higher futures and apparent strength in cutout values, cattle feeders were able to get $ 94 live and $149 dressed on Friday. The 5 area prices thru Thursday were $92.37 dressed and $147.84 compared to $92.02 and $147.51. At midday Friday the Choice was $156.08 up .90 and the Select was $151.47 down .63. The Choice Select spread was $4.71 up from the $1.47 last week. It appears the warmer weather had the grill heating up and may be responsible for the widening of the spread between Choice and Select. It could also be so movement of cattle a little early on this stronger market and with cost of feed increasing. Prices of feeder steers, heifers and bulls were called steady to $2 lower with weights over 600 # steady to firm, instances of $1 to $2 higher. As of last week 46 % of the hay in the field was rated good and 37 % fair. Some hay cutting has started with the good weather early this week. With the somewhat surprising strength in fed cattle prices, cattle feeders could slow sales if it looks like the money made on cattle owned might exceed that on newly purchased cattle. For feeder cattle bought earlier, if feed cost were tied down, the recent improvement in fed and feeder futures at least offer to set a higher price floor with options or buy price protection with LRP. The LRP offerings on Tennessee feeder cattle have improved this late this week compared to late last week, giving stocker/backgrounders some choices in level of protection. The higher cost of feed is causing a reduction in swine herds. According to the Daily Livestock Report in the last four reported weeks (3/29 - 4/19) US producers sent 15.8 % more sows to slaughter than a year ago. There are also current reductions in egg sets and chick placements. These actions point towards smaller supplies of those meats in late 2008 and early 2009. Smaller supplies usually means higher prices given a stable demand. The fed cattle futures are reflecting the expectation for significantly higher prices later this year. Leaving the top open would seem to be a reasonable price risk management strategy. However, remember that tying down the selling price without managing feed cost can be an expensive mistake. We are approaching the noted May 15 date when corn yields will begin to be affected by the late planting date. Much corn has been planted over the past 10 days, but we are still far behind a year ago and the 5 year average. Anything that threatens yields will drive prices higher.
TECHNICALLY SPEAKING: Based on Thursday’s closing prices. June fed cattle closed at $93.65 up $1.82. Support is at $92.28, then $89.98. Resistance is at $94.58, then $96.88. The RSI is 62.12. August cattle closed at $99.30 up $1.67. Support is at $98.07, then $96.02. Resistance is at $100.12, then $102.17. The RSI is 62.77. May feeders closed at $106.78 up $1.05. Support is at $106.13, then $105.11. Resistance is at $107.16, then $108.18. The RSI is 61.02. August feeders closed at $109.47. Support is at $108.57, then $107.04. Resistance is at $110.09, then $111.62. The RSI is 60.15. Friday’s closing prices were: June fed cattle $94.52 +.87; August $100.20 +.90; October $107.05 +1.30. Feeder cattle - May $107.35 +.57; August $109.92 +.45; September $111.55 +.65. The August fed cattle were up $1.95 from a week ago. The August feeder cattle were up $2.05 from a week ago. Corn was up 16 cents from a week ago. On 5/7 the feeder steer index was $105.18.
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