In Texas we basically have three types of producers in the cattle business; cow-calf, stockers, and feeders. The majority of these producers are cow-calf operators. At the current time, selling weanling calves is very profitable, when you consider a 500 lb. steer at $1.30. The main question is, where will calf prices be this fall?
To keep prices high, all three types of operators need to be profitable. If one group starts losing money, prices change. There are many factors that will effect cattle prices in the months to come: 1) High oil prices; 2) Rising interest rates; 3) Corn prices that have already increased 10 percent in the last two weeks; 4) Moisture_is it turning dry?; and 5) Foreign trade.
Consider a feeder today buying a 500 lb. calf for $1.30. With a cost of $650, he now adds the following costs in the yard: 1) Trucking $5; 2) 750 lb. gain at 48 cents = $360; and 3) Interest at 8% for 240 days = $35. This makes the feeder have $1,050 in a 1,250 lb steer. If he sells at $2 back of the February board, that is $88.45. This returns $1,080. That means the feeder nets $30 on a $1,000 plus investment.
If any factors change to put this scenario in the red, calve prices will come down.
By Bryce Myrick
Director, TFB Agricultural
Marketing Education
SEPTEMBER - CORN
MAY - FEEDER CATTLE
Fundamentals:
Increasing corn prices
Technical
Analysis: Trend - Up; Resistance - None; Support - 103.80
Fundamentals: Dry in corn belt
Technical
Analysis: Trend - Short term up / Resistance - 2.36;
Support - 2.13
OCTOBER - LIVE CATTLE
Fundamentals: April cattle on feed increased 30 percent in Texas.
Technical
Analysis: Trend - Up / Resistance - 87.80; Support - 83.30
