Weekly Round-UP
- Cash ending last week up with an average of $126.04 on Strs and $125.58 on Hfrs
- Boxed Beef ended the week at $345.06 Choice and $318.53 Select
- Steer and Heifer weights are once again in line with 5 year average, trending up though, while kill for last week was above 660,000 head
- Total Cattle on Feed 98% vs 98.2% average of estimate
- Placements in July at 92 vs 92.9% average of estimates
- Marketings in July at 95% vs 96.4% average of estimates
Is this Heaven?
Last week we saw the funds get a great jump on liquidating grain positions, and cattle mostly traded sideways. Then CoF Friday gave the feedlots what theyve been wanting for some time- Hope! Is this heaven? No this is Iowa! Feed prices going down with a rally in fats? Sure seems like a cattle feeders heaven. But a look deeper has us questioning everything.
Today, front contract months have certainly received the biggest jump, as they should. Marketings were lower in July, which usually isnt bullish. But when you combine lower marketings with steadily rising cash, it becomes easy to see we are current. Packer margins are excellent. They want to kill as many as they can and need the animals to fulfill their holiday orders.
Before I proceed, let me make this clear- I am not bearish first quarter of next year. But I am not a fool here either. The Dec-Feb and Dec-April spreads have really tightened up today, coming out of Fridays news. But looking at the placements, I am not $150 bullish April either. I like selling December here, holding that as a Feb/April Hedge, well through the holiday, then rolling out. The seasonals come into play as boxes could start to work lower in a couple weeks, and I fear cash cattle will not continue to post $2 gains each week as soon as we get out past that Labor Day market. Selling Dec above $135 looks like a good play with cash still below $130 and cost of gains going down.
Anyone bullish feeder cattle up here? We must ask where is corn goingbefore deciding what positions to take. We all know of the $4.80 gap on December corn. And Pro-Farmer crop tour finished up last week, estimating the national yield at 177 bushels/acre. That number is not bullish. Im a buyer of corn just under $5.00 as we have continued to see sales during this decline. So, I could be bullish feeder cattle here for the moment. On the phone Saturday, I told a producer looking to buy Oct delivery 5 weight steers, that buying the Oct feeder board, and waiting on the purchase of the cattle would be my preferred move. I feel like corn has some room to go lower, but as we come out of harvest, we could see a rally, pulling feeders back down some. I wouldnt hold that long position to expiration, but if ranchers wean and sell early because of the drought, lighter calves could step back over the course of the next several months, a while yearlings stay elevated with April-June holding strong. Good luck, and keep those gates chained until Friday please!!
Looking to Trade or Hedge Cattle Please reach out and let’s chat…
Dan Gerhold
319.320.4774
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