Market Notes: Corn and Cattle Prices
The cash cattle market can only be described as flat for the last six weeks. Kansas printed 120 for a practical top for three weeks and then 119 for three weeks after that. We may have several more weeks of flat to slightly higher/lower prices with little encouragement coming from the latest Cattle on Feed report. In the July report, cattle on feed was 97% of a year ago while the analysts expected 97%, Placements were 95% and average expectations were 94.9%. Cattle marketed were above the 94.7% guess and posted 97%. With one less kill day than last year, marketing’s looks to be supportive the front months futures. Looking at the cash seasonal, an uptrend should begin by the end of July to the first week in August and would be in line with what the weight breakdowns are showing for available cattle.
USDA updated their price projections out to the second quarter of 2014. The chart below shows the price range by quarter.
The uptrend looks to continue according to USDA projections. Producers should consider taking advantage of futures prices on rallies by using put options on cattle being fed. Given the current market climate, put options would probably work best because the cash market could still have an up trending surprise in store for us later in the year. Box beef prices continue to be above a year ago and should start to show some further strength into winter. If the economy can hold together and show some improvement into the third and fourth quarters, the cattle market will probably be supported by the underlying strength in the financial markets.
USDA, in the July Supply and Demand grain report, indicated a very slight increase in planted acreage, a small reduction in harvest acres and yield unchanged. Variable weather conditions during corn planting last spring makes guessing the final outcome difficult. It is our understanding that for the most part, corn condition is acceptable but maturity is variable. We are not anticipating a lot of problems during the pollination period with the current weather forecast. If you need to have forward coverage on feed needs we suggest calls options. The current market thinking seems to be that the US has lost demand from last year due to the drought. We wonder though if there isn’t pent up demand lurking in the background that will surface once corn harvest is in full swing. Corn could have some surprising strength at harvest lows, both domestically and worldwide. It is difficult to beat corn for feed even though alternatives are possible.
Disclaimer: This material has been prepared by a sales or trading employee or agent of Schwieterman, Inc. and is, or is in the nature of, a solicitation. This material is not a research report prepared by Schwieterman, Inc. Research Department. The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. The information contained herein is based on data obtained from recognized statistical services and other sources believed to be reliable. However, such information has not been verified by us, and we do not make any representations as to the accuracy or completeness. All statements contained herein are current opinions which are subject to change. You may visit our web site at www.upthelimit.com.