Cattle & Ranch Report
February 4, 2025
Live Cattle:
The Mexican border open, with no tariff’s, suggests an onslaught of inventory to be herded across the border before it is potentially shut down again. About the time they get caught up with this, wheat pasture cattle will be coming off, leading me to expect a sizeable placement in the spring of this year. Beef/dairy cross continues with now approximately 18% of cattle on feed a dairy cross in some fashion. That will only grow. Next is the cow slaughter, or lack of. I think, not to be confused with fact, that cattlemen, whether beef or dairy, are risking impregnating a cow for another calf, while taking no risks of selling heifers at all time historical highs. Note that beef production was a record in 2022, 6% less in 2023, 2024 even with 2023, and 2025 expected to be even with 2024. The tiger trap is deep and the guys with the shovels are making it even deeper this morning.
Feeders:
Cattle feeders are urged to consider what can be done with the recent shift in basis. Cattle feeders can buy at the money call options on futures that are $12.00 to 14.00 discount to the index. If one then sells a put option $10.00 out of the money, it produces the potential to own incoming inventory at under cash, with potentials of $20.00 to $23.00 lower than at present. Backgrounders are just the opposite. The wide positive basis has them marketing inventory at the same discount that is beneficial towards cattle feeders. I recommend you continue to follow the Moore Research seasonality as closely as possible. As stated last week, that is for the futures to top the end of January, decline the first week of February, increase the second week of February, and then decline into the first of June. Input costs continue to be an issue and that does not appear to be shifting towards a more favorable manner.