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News
Corn Hits 10-year High
It wasn't unexpected but it was still significant when
December corn futures closed last Thursday at $3.44/bu., the highest
level in 10 years. At the end of the week, it had dropped a couple of
cents. Depending on how you bet on the crop report to be released this
week, that recent high may merely be a plateau before surging on
ahead.
"Cash grain prices were up 25% during the month of October and are now
twice year-ago price levels," say reporters for USDA's Ag Marketing
Service. "It's not that there's a shortage of America's favorite cattle
feed; estimates are projecting this year's crop to be the third-largest
in history. Chicago Board of Trade corn contracts are selling on
excitement from the growing ethanol industry and an increase in export
demand. Speculators have jumped on the bandwagon and are said to hold an
estimated net-long futures position greater than 250,000 contracts.
Cattle feeders can only watch in disbelief as they continuously refigure
their projected cost-of-gains."
True enough, but there's also the fundamental reality of the lowest
estimated ending stocks in three decades occurring in tandem with
burgeoning demand.
Steep increases in corn price are certainly taking their toll on feeder
and calf prices (see Markets below)
U.S. Beef Back To South
Korea
The first U.S. beef in almost three years made its way
inside South Korea last Tuesday. Though trade has been open for a couple
of months, U.S. packers have been understandably skittish about sending
beef to a country that maintains a zero-tolerance policy concerning bone
fragments. Hopefully this first nine tons will be the trickle that
cracks the dike.
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Weather And Crops
Hay Production Down
Feed it if you've got it, or better yet, sell it if you
can! Hay that is.
According to the Oct. 19 "Livestock, Dairy and Poultry Outlook" from the
USDA Economic Research Service (ERS), hay production is estimated at 147
million tons this year, down 2.4% from last year; May 1 hay stocks were
down 23% from a year ago.
Consequently, explain ERS analysts, "Hay supplies are likely to be
fairly tight and expensive for this winter, particularly if a more
normal winter pattern develops following the mild winter last year."
According to ERS, the September farm price of other hay averaged
$93/ton, up from $78.90 a year ago. Alfalfa hay prices averaged $112/
ton, up from $106. Depending on where you live, you've been paying lots
higher prices to make for such a low average.
Other hay production is forecast to be down 3% from 2005. Alfalfa hay
production is estimated at 2% less.
On a happier note, ERS says pasture conditions continue a modest
recovery, though favorable temperatures and moisture are still needed to
accumulate much-needed growth for winter grazing.
Plus, rains in recent weeks, along with improved soil moisture, are
making wheat pasture look more promising.
For the week ending Oct. 29, according to the National Agricultural
Statistics Service (NASS):
- Corn -- 68% is harvested, which is 10% behind last year and 3% behind the
five-year average. In the Northern Plains and adjacent areas of the Corn
Belt, harvest progressed rapidly under mostly dry conditions, advancing
29 points in Minnesota, 25 points in North Dakota, and 23 points in
South Dakota.
- Soybeans -- Growers have harvested 83% of the
crop, compared to 91% at this time last year and
85% for the average. Harvest was complete in Mississippi and nearly
complete in Louisiana, Minnesota and the Dakotas, but trailed behind
normal across most of the Corn Belt. As with corn, producers in the
eastern Corn Belt were well behind normal due to soggy fields.
- Winter Wheat -- 91% of the crop is sown, 1% less than the same time last year but the same as
normal. 73% of the crop has emerged, 2% behind last year, and 3% behind the normal pace.
60% is rated good or excellent, compared to 61% at the same time last year.
- Sorghum -- 90% is mature,
compared to 86% last year and 87% for average. In the two largest
producing states, Kansas and Texas, progress trailed 5 and 3 points
behind normal, respectively. 59% has been
harvested, compared to 69% last year and 69% for
average.
- Pasture -- 28% is rated Good or Excellent, compared to 29% last year. 22% is
rated Poor and 17% is ranked Very Poor, compared
to 21% and 16% respectively at the same time last year.
States with the worst pasture conditions -- at least 40% of the acreage
rated poor or worse -- include: Alabama (50%); California (84%); Florida (50%); Kansas
(46%); Missouri (56%); Nebraska (45%); Nevada (40%); North Dakota (50%);
Oklahoma (58%); Oregon (55%); South Dakota (44%); Texas (54%); and Wyoming (63%).
States where pasture conditions are best -- at least 40% rated good or
better -- include: Arizona (52%); Idaho (40%); Illinois (54%); Indiana (67%); Iowa (48%); Kentucky (73%); Maine
(75%); Maryland (53%); Michigan (50%); New Mexico (62%); New York (40%); North Carolina (65%); Ohio (68%); Pennsylvania (56%); South
Carolina (55%); Tennessee (42%); Utah (56%); Virginia
(62%); Washington (41%); West Virginia (55%); and
Wisconsin (46%).
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Stocker Economics
So Long Cheap Feed?
"The era of cheap feed is probably over for years to
come," says Chris Hurt, Purdue University Extension economist. In the
Oct. 23 "Weekly Outlook," he explains, "Over the past eight crop years
from 1998 to 2005, U.S. corn prices averaged just $2.05/bu.
Historically, the cattle industry has been the animal segment that makes
the biggest adjustments to high-priced feed, and that will likely be the
case this time as well. The recent decline in calf prices represents a
potential for $1.9 billion in lower annual returns for cow-calf
operations. Excess capacity in feedlots will be costly as well. However,
learning to feed distillers' grains at much higher inclusion rates
remains the opportunity."
Similarly, Darrell Mark, University of Nebraska-Lincoln ag economist,
offered this perspective Oct. 23: "In recent months, we've seen yearling
placements decline relative to year-ago levels due to short supplies of
heavier feeder cattle outside of feed yards (they were placed earlier in
the year)."
He says the continued increase in lightweight calf placements in recent
months are a result of at least three factors.
- Drought-stressed pastures in the Northern Plains and West likely
prompted early weaning.
- Feeder-calf prices have declined at least 8% (basis Nebraska) in the
past month due to softer fed-cattle prices and much higher corn prices.
Given the outlook for fed-cattle and corn prices, feeder-cattle prices
may not improve, so some producers are taking advantage of current
prices that are still relatively good by selling calves now.
- Cattle feeders may be trying to take advantage of feedstuffs cheaper
than corn in some local markets and that are more suitable for
growing-calf rations than for finishing diets. For example, placements
in South Dakota were up 25% in September. Hay prices are $50-$75/ton
less than in Texas where placements dropped 10%.
"Clearly, the rapid rise in the corn market of nearly $1/bu. in the past
month (basis Omaha) negatively impacts feeding margins," Mark writes,
adding that the change in corn prices boosts breakevens for finishing by
about $4-6/cwt.
Mark's complete comments are available at www.lmic.info/memberspublic/InTheCattleMarket.html.
You can read more of Hurt's comments at www.farmdoc.uiuc.edu/marketing/weekly/html/102306.html.
Events
BEEF Quality Summit Is Almost
Here
Sign up now at www.beef-mag.com for BEEF magazine's 2006
BEEF Quality Summit. The Nov. 14-15 workshop in Oklahoma City's
Clarion Hotel aims to provide attendees with the background, tools and
the environment to make the connections for involvement, and the
potential rewards offered, in the new beef-value chain.
The first day's program is devoted to outlining the opportunity
available in the new beef-value chain, the second to how to link your
production into that chain. Among the topics to be discussed are:
- How U.S. beef consumers define quality.
- Quality, profit and the cattle cycle.
- International competition and opportunities for U.S. quality beef.
- Current international beef trade opportunities.
- Producers will discuss how they're paid for quality.
- Selecting a marketing partner.
- Evaluating costs, trade-offs and risks of various markets
- Linking up with a marketing partner -- an opportunity to meet with
participating marketing channel reps.
For more detail, visit www.beef-mag.com and click on the "BEEF
Quality Summit" box in the top right corner of the opening page.
Other Upcoming Events
Feb. 13-14 -- Mid-South Stocker Conference, Cave
City, KY, presented by the University of Kentucky and the University of
Tennessee. For more info, visit www.midsouthstocker.org. You can also contact Jim
Neel at 865-974-7294 or jneel@utk.edu; John Bartee at
931-648-5725 or jbartee1@utk.edu; or John T.
Johns at 859-257-2853 or jtjohns@uky.edu.
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Markets
Corn Cost Chops Feeder & Calf
Prices
Compared to last week, yearling feeder cattle sold
steady to $3/cwt. lower in a light test, while steer and heifer calves
traded weak to $6/cwt. lower, say reporters for USDA's Ag Marketing
Service (AMS). Plus, they point out this trend was primarily established
before Thursday's sharp losses in the Chicago Mercantile Exchange Feeder
Cattle futures.
Direct fed-cattle prices were steady to $1 lower at $88-$89.50; dressed
sales were $3 lower, from $137 to mostly $138.
"Nationwide, auction receipts are running lighter than last year and
larger-scale producers continue to hold cattle while resisting country
and video bids," explain the AMS folks. "Cattle sellers have yet to
embrace a significantly lower feeder-cattle market, but tighter
availability has yet to improve demand. However, buying interest
continues to be fairly good for yearling offerings (albeit at lower
price levels) while calves are finding narrow outlets, with the
exception of lightweights weighing under 500 lbs."
The summary below reflects the week ended Nov. 3 for Medium and Large 1
-- 500- to 550-lb., 600- to 650-lb., and 700- to 750-lb. feeder heifers
and steers (unless otherwise noted). The list is arranged in descending
order by auction volume and represents sales reported in the weekly USDA
National Feeder and Stocker Cattle Summary:
| Summary Table |
| State | Volume | Steers | Heifers
|
| Calf Weight | 500-550 lbs. | 600-650 lbs. |
700-750 lbs. |
500-550 lbs.
| 600-650 lbs. |
700-750 lbs. |
| Dakotas | 41,000
South Dakota
North
Dakota |
$120.32
$115.94 |
$110.94
$107.53 |
$107.93
$104.64 |
$110.93
$106.22 |
$104.70
$98.99 |
$101.40
$95.81 |
| OK | 38,700 | $118.73 | $108.39 | $107.79 | $104.20 | $97.53 | $100.75 |
| MO | 35,700 | $117.48 | $108.31 | $110.40 | $105.50 | $105.71 | $101.49 |
| TX | 28,200 | $115.01 | $103.13 | $101.05 | $1086.61 |
$94.30 | $98.01 |
| KY* | 26,200 | $111-121 |
$103-108 | $97-1025 | $100-110 | $93-102.503 | $89-995 |
| NE | 25,100 | $124.11 | $115.62 | $111.74 | $111.90 |
$104.524 | $106.34 |
| KS | 14,500 | $127.13 | $112.82 | $106.87 | $113.21 | $105.33 | $99.27 |
| AL | 14,200 | $109-114 |
$94-100 | $92-1984 | $196-106 | $90-96 | $81-875 |
| AR | 13,800
| $109.91
| $104.03 | $195.38 | $98.26 |
$94.35 | $87.39 |
| CO | 10,400
| $117.68
| $105.11 | ** |
$106.92 | $104.702 | ** |
| TN* | 10,300 | $1073.72 | $95.78 | $91.49 | $94.02 | $89.99 | $837.19 |
| NM | 10,100
| $117.63
| $108.95 | $98.93 | $100.77 | $100.452 | $94.86 |
| FL* | 9,900 | $92-116 | $86-101 | $84-934 |
$92-102.50 |
$80-86 | $75-874 |
| MT | 8,700
| $115.02
| $109.552 | ** |
$104.56 |
$100.562 | ** |
| GA*(***) |
8,500 | $93-113 |
$87-99 | $83-91 | $80-110 | $78-103 | $77-984 |
| WY | 8,100
| $122.50
| $112.502 | $110.666 |
$104.13 |
$101.952 | $96.926 |
| MS* | 7,700 | $95-1051 | $90-1003 | $80-90 | $90-1001 | $80-903 | $70-805 |
| IA | 7,600
| $117.65
| $111.06 | $108.69 | $102.57 | $99.08 | $101.80 |
| LA(ND) | 7,300 | $94-108 | $88-1122 | ** |
$89-105 | $84-1002 | ** |
| Carolinas* |
6,500 | $90-115 |
$84-1033 | $82-925 | $80-95 | $70-893 | $68-845 |
| WA* | 3,500 | $104.67 | $101.09 | $95.35
|
$103.15 | $93.62 |
$91.184 |
| VA | 2,400
| $106.172 | $99.80 | $101.29 | $94.662 |
$88.29 | ** |
* Plus 2
** None reported at this weight or near weight
(***) Steers and bulls
NDNo Description
1500-600 lbs.
2550-600 lbs.
3600-700 lbs.
4650-700 lbs.
5700-800 lbs.
6750-800 lbs.
7800-850 lbs.
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Contact
Questions &
Comments
Please send questions to:
Wes Ishmael, Contributing Editor, BEEF Stocker Trends, at wesleysink@aol.com
Joe Roybal, Editor, BEEF magazine, at jroybal@beef-mag.com
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