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| A quick overview in feeder cattle.
In 2007 65.9% of the July 1 Other heifer Inventory was killed in the 3rd & 4th quarters compared to 63.76% in 2006
In 2003, for example, we killed 57.18% of the Jan 1 Other heifer inventory in the 1st & 2nd Qtrs & in 2005 this rate declined to 50.44% & last year bumped up slightly to 51.41%
Feeder cattle outside of feedlots calculates to 28.308 mil. Head vs. 28.242 a year ago.
Our 4th year of a calculated calf crop below 38 mil. Head.
When I look at these numbers I see nothing building which concerns me.
Overview.
The trimmings market is the key to fed cattle prices. Beef, since the big liquidation in the 75-76 period has become very inelastic due to the expansion of fast food & the consumer preference for lean meat.
Therefore, in grinder formulations when the cow kill declines & it is necessary to reach into fed cattle supplies for chucks –fed cattle prices will experience very strong prices.
In periods of herd liquidation, and the cow and overall non-fed kill increases the trimmings market is pressured & removes the price gloss from fed cattle.
Regardless of ivory tower rhetoric-university analysts-beef is a supply oriented market. Demand is a residual number as we either eat or store whatever we produce.
Concerns & front burner issues:
The profitability of feeding cattle
Pasture conditions.
Herd liquidation.
Economic deflation
Convert hay & grazing land suitable for row crop.
All of the above are possible motivations for herd liquidation.
I have twice bought feeders in the past six weeks, stopped myself out of the market once & am now confident the bottom may be in, except not yet 100% in view of high feed costs.
I think the breeding herd is in strong hands & if we do see herd liquidation it will be brief. Any significant price decline in the distant futures options is, in my opinion, a buying opportunity. Particularly in view of inflationary prospects.
For a variety of reasons (i r s) I prepare my own research & trade in a separate entity & have an extensive meat data base & have a staff of one (me) & am working on an overall meat scenario & not sure when I will be completed but will be happy to email a copy when finished.
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A Brief View at Feeders.
