Excerpts From Purcell Weekly Market Analysis Report 13 Dec 05
LIVE CATTLE (LC) on the DEC’05LC in Chicago were up $1.275/cwt at $93.75/cwt. The FEB’06LC was up $1.05/cwt at $96.25/cwt. Massive fund buying fueled the February contract enabling April, October, and December ’06 LC futures to new highs. Sources said “the funds don’t care about fundamentals.” Cold weather forecasts in the Plains next week added strength to news of opening Japanese beef markets. Higher beef prices, fewer cattle, and improved packer profit margins should prompt increased demand for fed cattle. USDA on Monday reported choice boxed beef cutout up $1.55/cwt to $155.77/cwt. Next week’s Cattle on Feed report is expected to show large November placements and increased fed cattle supplies. This will provide only limited resistance in deferred months.
The average beef plant margin for Tuesday was estimated at a positive $16.20/head, up from a positive $2.50/head on Monday while up from a negative $17.00/head last week, according to HedgerEdge.com. Live cattle feeders stopped out of hedges should continue to be watchful of the short FEB’06LC opportunity on 1st quarter marketings.
The market is still ignoring USDA’s estimate of a 4% increase in beef production in the 1st quarter and an 8% increased beef production in the 2nd quarter of 2006.
FEEDER CATTLE on the CME JAN’06FC were up $0.65/cwt late in the day at $114.82/cwt while the MAR’06FC were at $114.325/cwt, up $0.825/cwt. September and November posted new contract highs. Feeders followed live cattle higher amid support from discounts on nearby contracts. There was little resistance even though cash feeders were steady to $3/cwt lower on Monday. Cash market fundamentals are buoying the market in the near term as sellers keep weights current and resist the temptation to sell light. Cash sellers should continue to keep marketings and weights current while hedgers should be consider short hedges in the MAR’06LC futures.
posted by Dr. Harlan Hughes 8:24 PM
Adding Value to Cull Cows
Greg Lardy, NDSU Animal & Range Sciences
Cull cows represent a significant source of income for beef cattle producers. In fact, cull animals account for about 15 to 20% of the gross income in a beef cattle operation. With the Canadian border closed, the value of cull cows has increased even further due to the demand for ground beef in the U.S. In spite of this, cull cow marketing is an often overlooked management strategy on many ranches. Prices for cull cows follow seasonal price patterns. Prices for cull cows in Sioux Falls are typically lowest in November and highest in March and April. This shouldn't surprise anyone, given the fact that cows are pregnancy tested and most culling decisions on ranches with spring calving cow herds are usually made at this time. There is an opportunity to add value to cull cows by evaluating marketing plans and taking advantage of seasonal changes in prices.
Most cull cows gain weight rapidly when placed on a high concentrate diet. Data collected at NDSU indicates that corn- or barley-based high concentrate diets produced similar average daily gains (see Figure 101 at www.beefcharts.blogspot.com)
As cows were on feed longer and gained condition, feed conversions were poorer and weight gains decreased. Cows were slaughtered at 0, 42, and 87 days on feed. As you might expect, the cows slaughtered earlier had lower live and carcass weights, lower quality grades, less back fat, and less carcass value per head (Figure 102 at www.beefcharts.blogspot.com)
Research conducted at SDSU showed similar trends. Cows fed for longer periods of time had increased live and carcass weights, increased dressing percentages, and increased rib eye areas. The effect of implanting cull cows with Finaplex-H, a growth promoting implant containing trenbolone acetate (a testosterone analog), was also evaluated. Cows implanted with Finaplex-H had lower dry matter intakes, similar average daily gains, and improved feed efficiencies compared to non-implanted cows.
Another interesting finding of the SDSU research was the number of cull cows purchased for the study that were actually in advanced stages of pregnancy. About 23% were in advanced stages of pregnancy (more than 5 months pregnant). Slaughtered pregnant cows typically have lower dressing percentages than non-pregnant cows due to the increased weight associated with the gravid uterus. The SDSU researchers sold the pregnant cows and made about $200 per head on the transaction.
Montana State University research (Funston et al., 2003) indicated implanting cull cows with Synovex Plus increased final weight by approximately 40 pounds and average daily gain by 0.48 pounds per day. Their research also indicated very little correlation between initial weight or initial body condition score and average daily gain during the feeding period, indicating thin cows did not gain any faster than cows in better condition.
Seasonal lows in cow prices and/or low priced feed can make feeding culls an attractive and lucrative opportunity. As you approach pregnancy testing and culling decisions this fall, be prepared to take advantage of opportunities to add value to cull cows. Feeding cull cows high concentrate diets can improve returns by selling more pounds and selling cows into a market that is seasonally higher than late fall and early winter markets.
posted by Dr. Harlan Hughes 6:53 PM
Japanese Border Opening
Saturday, December 10, 2005 9:48 PM
There Will Be Prime Rib In Japan For Christmas
Well it seems to have finally arrived. After being locked out of the Japanese market for
roughly two years, the market is partially reopening to cattle products from cattle 20 months
of age or younger.
Midweek -- before the announcement had even become official -- U.S. packing companies
were making arrangements for the first shipments of U.S. beef to Japanese consumers since
This is a great victory, but certainly only a partial victory for the U.S. beef industry.
Discussions will turn now to convincing Japan to accept the international standard of 30
months of age.
It will definitely take time to win back our markets fully, but the effort is certainly worthwhile.
Gregg Doud, National Cattlemen's Beef Association economist, says foreign market trade for
U.S. beef was worth about $15/cwt. to the fed market before the 2003 closure. The U.S.
has thus far regained a third of that or about $5/cwt., and Japan represents half of the $10
left on the table.
Source: NCBA Electronic News Letter Dec 2005
posted by Dr. Harlan Hughes 4:03 AM
Japan Border Open Announcement
Monday, December 12, 2005
Under the agreement announced today, the United States is able
to export beef from cattle 20 months of age and younger to
Japan. More than 94 percent of total U.S. ruminant and
ruminant products, with a total export value of $1.7 billion in
2003, are now eligible for export to Japan. In 2003, the United
States exported $1.4 billion worth of beef and beef products to
Japan. Prior to the December 2003 discovery of the first BSE-
infected cow in the United States, the U.S. exported beef and
beef products to 119 countries. With the opening of Japan, 67
countries have now established trade to at least selected U.S.
beef and beef products.
Source: USDA Japan Announcement 12 Dec 2005
posted by Dr. Harlan Hughes 4:00 AM