CASH FALTERS AS PACKERS
LOOK AT MORE CATTLE
Prepared by Hales Cattle Letter
“Dave, It's Getting Harder To Sell Cattle...”
One Texas feedlot owner remarked after selling only a third of this week's show-list. A buyer that wouldn't bid on the cattle said there was too many other cattle to look at and they didn't need to buy the shorter day or plainer cattle for the same price as the good ones anymore. Comments like this will be repeated more often during the next three or four months from Texas through Nebraska as the industry begins to market the burdensome fed supplies.
Beef Production Up, Cow Slaughter Down
Even though fed supplies were considered relatively short during the last 30 days, steer and heifer slaughter averaged about 40,000 head per week above last year. How big will steer and heifer slaughter become when the real numbers hit in December through February?
Consider the next Cattle on Feed report. If Friday's report is equal to the average of the pre-report estimates, there will be about 800,000 more fed cattle to be sold during the next 90 days than there was last year. Beef production will stay well above last year through February. Fed steer prices dropped to $65 last December, then fell to $63 in February of 1997.
With February and April futures maintaining the current premium to cash, it is doubtful that fed supplies will stack up for the December through February time period as neat as the projections say. These premiums reflect a bullish attitude about the future that totally ignores the facts. As long as this attitude exists, supplies will be pushed toward the future and spread over more marketing days. Even the most optimistic outlook, based on the known facts, indicates fed steer prices should fall to the $62-$63 area during December through February.
During the last four weeks cow slaughter has averaged about 20,000 head per week below last year. Even though cow slaughter is well below year ago levels, it is still above the 1991-1995 average. Herd liquidation continues. Eventually theme will be a light at the end of the tunnel. But for the cattle feeder, the next three months may contain only unending miles of darkness.
November 14,1997David Hales and Tom Horton
Hales Cattle Letter
P.O. Box 1623, Amarillo, Texas
Consensus National Futures and Financial On Line Index
Hosted by:
One Crossroads Place
610 West Maple Ave, Suite WWW
Independence, MO 64050
(816) 252-4080
sysop@kcmo.com
