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KayDee Gilkey Cattle Market Update
by KayDee Gilkey, click here for bio

Program: Land & Livestock Report
Date: March 10, 2017

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What might the future hold for the cattle market? CattleFax Senior Analyst Kevin Good says there’s reason to be optimistic. Increased profitability for cattle feeders is a positive signal for cow-calf producers, and the first step toward improving prices down the supply chain.

Good: “We’re guardedly optimistic as we think about the markets. Today cattle leaving the feed yard are profitable in addition to that you have some severe discounts in the deferred live cattle futures as well as a swap on feeder cattle — in other words you can buy a break even for considerably lower than what you are selling fed cattle for at today.”                        

 

There are three factors that are helpful in planning market strategies: are fed cattle moving out of feedlots selling for a profit or a loss? Are cattle purchased and placed on feed breakeven at or below the price that fed cattle are currently selling for on the open market. Third is the relationship between cash market and futures normal? Or is the futures market premium to cash or higher to cash than normal? If they are all positive that is a good indicator. For the fed cattle market, the industry expert offers this price forecast.

Good: “We think about feeder cattle we’ve got them averaging at $1.30 on a 750 weight. One of the reasons we wouldn’t have them any higher is because of the discount in the deferred live cattle futures. $130 average means the range of $120 to $140. If we are talking a 550 weight steer calf, we’ve got the annual average at $150 which we would suggest is a profitable level as we think the industry breakeven level is closer to $140. So again profitability to should lead to more expansion in 2017.”

 

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