Weekly Update: Jan. 6, 2011

The live-cattle trade Friday morning was light to moderate, with live and dressed prices lower than the week before. USDA’s mandatory price reporting (MPR) service reported that Nebraska sold 21,819 head at $197.18/cwt. dressed or $121.15 live for a weekly total of 34,994 head. Iowa-southern Minnesota sold 7,558 head at $196.15 or $121.81 live for a weekly total of 9,963. Kansas sold 33,654 head at $120.47 or $192.09 dressed for a weekly total of 34,510 head. Texas sold 9,075 head at $121 for a weekly total of 9531 head. The MPR weekly totals include negotiated cash and grid sales.

Live-cattle futures closed lower. February closed down 62 points at $120.32 ($121.45 last Friday), April closed down 30 points at $124.60, June closed down 52 points at $124.00, August closed down 45 points at $126.05, October closed down 30 points at $128.87 and December closed down 30 points at $129.40.

The week’s cattle slaughter was an estimated 560,000 head (vs. 639,512 head last year), with Friday’s kill 132,000 head and Saturday’s kill 27,000 head. Year-to-date FI slaughter is an estimated 560,000 head, down 12.5% from 2011’s 640,000 head. Hog slaughter year to date is down 5.1% on last year.

Boxed-beef cutout values were weak to lower on light to moderate demand and moderate offerings. The Choice cutout declined $1.20/cwt. from the day before to $190.10/cwt. ($194.73 last Friday) while the Select cutout declined $0.68 to $179.13. The Choice-Select price spread was $10.97/cwt. (vs. $15.29 last Friday). The reported spot boxed-beef trade for the week was 651 loads of fabricated cuts, 21.9% higher than the 534 loads the week before.

Packer margins for the week were negative by $41.53/head, compared to a negative $31.68 the week before, according to HedgersEdge.com.

PROJECTED CATTLE-FEEDING MARGIN
The projected cattle-feeding margin (cattle placed on feed Jan. 6, with an expected finish date of June 9) is a negative $77/head, according to the North American Institute for Beef Economic Research (NAIBER). This compared with a negative $20/head the week before. The lower and upper profit potential is a negative $322/head to a positive $179/head, vs. a negative $281/head to a positive $245/head last week.

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.

NAIBER also posts historical data and two graphs of its weekly calculations. 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