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New Mexico | spread was actually early Oct 2003 @ $34+cwt. carcass wt price ( not live wt ).
Coincides btw with the real current supply situation of 03, record exports then, cattle being pulled forward etc..
We're current on supply now, and with new record exports ( first 10 months of 011 would be a export record year and there's still 7 weeks to go ).
Right now 75% of the cattle in the SW are formula cattle.
That's why fat cattle there are $5 to $7cwt. under the Midwest.
( makes no sense for SW packers to bid up cash on 25% of the cattle when 75% supply of supply is precommitted at the cheaper money, trick of course is to keep the cash cheap in the SW ).
Formula wanes out after this week in the SW.
That will pull lite cattle forward ( thus reduces tonnage ), MUCH like late 2003.
Low on the c/s spread is April 2009 @ $0.43 cwt..
Since 2003 the avg spread has run say $8.65 cwt.
Latest low on the spread was 1st week of Aug 2011 @ $3.77 cwt..
The current spread is only wide due to perception.
Fact is it's only slightly above the 5 year avg..
From a spread percentage stand when you run say 5 years of $90+ cwt live cattle price with an $8.65 spread, that's in the 10-% spread to live price range.
$125 cwt cattle today @ 10-% would fall in at approx $12 cwt carcass wt spread diff.
I expect the spread to widen beyond the 2003 record of $34 cwt. ( 30+% spread diff to live price then )
Thinking in the $50 cwt range. ( 30% x $160 cwt live cattle = $48 to $50 cwt spread by June 012 )
Edited by Markwright 11/10/2011 15:17
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Choice-select spread very wide!
