Strong Planning Prices Projected For Cow-Calf Producers
Good news! My current Planning Price Projections (as of 30 Jun06) suggest that calf prices in the Fall of 2006 may equal or exceed fall 2005 prices! This is a change from my previous projections.
It looks like the 2006 drought in the southern region and the potential of drought in other regions has slowed the beef cow expansion that was projected as late as a few months ago. A slower national beef cow herd expansion suggests a slower price turn down in this cattle cycle.
The fact is that cull cow slaughter is up in the last few months suggesting that the beef cow build up has at least slowed.
Some other factors influencing these revised projections are:
1. We have considerable more bunk spaces than we had 10 years ago. These feedlots have two choices: 1) over-pay for feeder cattle or 2) let their bunk spaces go idle.
i. Most feedlot have considerable equity capital now so they are electing to over-pay for feeder cattle to ensure they use their bunk spaces.
ii. Someone, however, will not have feeder cattle to feed.
2. Corn prices are projected to be relatively low this year again leading to low cost of gain in the feedlot.
3. Calf-Feds placed 30 Jun 06 are projected to turn a slight profit. Yearlings placed 30 Jun are projected to loose money.
4. There is consider hype in the market again with respect to the Japanese market Just like in Dec05 thru Feb06.
i. I truly believe that this hype is misled but that is irrelevant if you are selling feeder cattle.
ii. Always remember with respect to hype. It can disappear just as fast as it appeared. Remember Mar and Apr 2006.
iii. Maybe one prices some calves now to lock in some of
these good calf prices.
If you have any comments or questions, please call me at 701-238-9607 or email at harlan.hughes@gte.net.
posted by Dr. Harlan Hughes 11:28 AM
