Cattle & Ranch Report

June 20, 2024
Live Cattle:
The spread today between front end and back leads me to believe the industry is wrapping up the end of the holiday seasons for the summer and preparing for the doldrums.  Grocer and restaurant buying for the July 4th weekend is believed wrapping up as next week will be the last full week before the holiday.  The run up in boxes is believed some short-bought retailers catching up in needs.  There isn’t a great deal to discuss as we wait to see how the consumer reacts to the most recent price rise in boxes as those are filtered into the grocery store shelves.  Fridays on feed report is expected to show about 11.4 million head on feed.  Still at growing weights and nothing like the shortages of cattle or beef that most expected by this time of the year.  The agenda has worked a near miracle towards not having prices run so high, it kills consumer demand.  While I do think we are on the threshold of, seemingly the shift to the grind is sufficient for the time being. Although futures may trade lower, there is nothing advantageous about them at the moment.  Cattle feeders have been dealing with a positive basis for months on end.  With the backgrounder, now having lost all their premium, the industry is a little void of participants that are willing to assume your risk.
Feeder Cattle:
Backgrounders have lost all but a fraction of premium they have been so privy to the past couple of years in the futures market. While there is still a smidge of premium the futures traders are offering, it’s nothing like the ideas they have had in the past. I think these factors are of the most important.  The consideration now is, managing risk of adverse price fluctuation with little to no premium, leaving significant room for error.  I recommend taking a moment to discuss what will keep the cattle feeder bidding high and often, and what you will do if or when they stop.  When thoroughly discussed, I recommend you consider the consequences of marketing at price levels between the current price of futures and potentially $10.00 to $12.00 higher.  Then consider what your position will look like in the month you are marketing against with the price of the index $20.00 higher or $20.00 lower.  This is a sales solicitation.  At present, $20.00 would be a mild correction or increase of less than 10%.  However, that 10% maybe all of the profit margin available. My personal opinion is that backgrounders are asking a great deal of cattle feeders to consistently assume their risk.  I recommend you take a role in your marketing that consists of most anything but the full reliance upon a cattle feeder to keep bidding higher. This is a sales solicitation.

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