PACKERS AND CATTLE FEEDERS
BOTH IN THE RED!
Prepared by Hales Cattle Letter
Nebraska Prices Discount Texas
Normally, Texas fed steer prices are slightly premium to Nebraska prices with only minor fluctuations from month to month. However, Texas prices this year have stayed well below Nebraska prices. Texas prices have surged from $1 under Nebraska in September to more than a $1 above Nebraska this week. Is this a signal that the fall rally is over?
The last time Texas prices gained $2 on Nebraska was in April and May. That sharp change in the Texas/Nebraska price spread was a signal that the spring rally was finally over. During the next 60 days fed steer prices fell about $8 in both states.
Concentration Remains In Four States
The net change of on feed totals from year to year for the four states and all other states. During the last 11 months the four states on feed totals have increased significantly month after month, while the other states have barely increased. As of the first of October, the four states' totals increased over one million head which is a 15% increase, while the other states increased 102,000 head for a 5% increase.
As a result of the changes in the cattle feeding industry, the old seven-state Cattle on Feed reports are no longer indicative of the state of the cattle feeding industry. Instead of a seven-state report, the USDA should revamp the report to a six-state report.
California, Arizona and Iowa should be dropped. New Mexico and Oklahoma should be added. With over 80% of all cattle being fed in these six commercial feeding states, this change is long overdue.
October Placements?
Most feedlots from Texas through Nebraska have had a waiting list for pen space since late September. Everything shipped out of the yards in October was replaced. Yards are jam packed. Pens are full, alleys are full, temporary traps are full and even the yard that never fills is full this fall.
Last year October placements were up 11%. Most analysts are expecting October placements this year to be down 2% to 5%. If they are down 5%, they will still be 2% above the five-year average. A 5% decline would still indicate 600,000 more cattle to sell in December to February. Not bullish!
November 7, 1997David Hales and Tom Horton
Hales Cattle Letter
P.O. Box 1623, Amarillo, Texas
Financial Commentary | Consensus National Futures and Financial On Line Index
Copyright 1997, by Consensus Inc. All American and Pan American rights Reserved. editor@consensus-inc.com
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