After last week's bearish cash cattle news (trading from $90 to $91.50 in Kansas and Texas) the word is steady for this week. The previous week saw most action at $92 in those areas. Overall we look for a $90 to $94 trade through February, then appreciation in March. Tuesday part of the trade was interested in the economy. Should the beef complex even care about economic news anymore? In other years dramatic changes in the economy and consumer confidence would be something for the beef industry to watch. As attendees to our annual outlook conference learned on Saturday all of the bad economic jargon we heard from the news programs on TV had no impact on beef demand in the US this past year. Our models actually suggest beef demand increased during 2007. Last year we had energy prices rise from January 1 to December 31, we had the sub-prime business, and late in the year we had inflation and unemployment fears. With all of this bad news demand did not fall. We are not saying it will not fall if this talked about recession actually does happen. It is just that so far economic fears have not hit beef demand. In normal years economic concerns could shift protein buying from high priced beef cuts to chicken or pork. Also people are less apt to eat at higher end restaurants where steaks are featured. For near term action the April/June fat cattle spread has a green light and could get to $3 to $4. For hedging we have added new orders to our hedging plan. In other news Minnesota found another herd with bovine tuberculosis. This brings the total to nine herds since July 2005. This should have no market impact.
We do not write specifically about Feeder Cattle much as almost all our trading interest is on fat cattle. On the feeder end we see prices remaining pressured into March. Not only have higher corn prices been a concern but also feedlots have been inundated with feeders off winter wheat pastures. Also keep in mind feedlots have been losing a solid chunk of money since June. Their appetite for a few extra feeders coming in is limited. Near term is bearish. In the big picture perhaps around summer time we may see the situation change. A heavy flow of calves and feeders since September will mean fewer numbers available for placements later this year. Our target upside for October feeder cattle futures is $113, which is where we would begin hedging.
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