Iowa Farmer Today
01-27-07
Cow-calf producers may like 07
By Jeff DeYoung, Iowa Farmer Today
Feeder cattle prices may be sharply lower since the 2006 harvest, but 2007 is
still shaping to be a profitable year for cow-calf producers.
Shane Ellis, Iowa State University Extension livestock marketing
economist, says futures prices remain well above break-even levels.
“Break-evens are between 80 and 90 cents, and feeder cattle prices on the
futures market are well above that into the fall,” he says.
“Yearlings are even above a dollar (per pound) on the futures market, so unless
some sort of bombshell occurs, those cow-calf guys are going to make some
money.”
Ellis says feedlot placements have been slower in recent week, particularly
because of corn costs. While corn prices have leveled off some, this should help
feedlots make placement decisions, he notes.
“We are seeing cattle taken to heavier weights, so the cost of feeding them is still
worth it to them.
“They are looking at what they paid for feeder cattle, and are able to justify the
extra feed to help make up for that.”
Ellis says the industry still has large numbers of cattle on feed, adding some of
the calves placed at lighter weights last year are working their way through the
chain.
“We should see those cattle coming through in the coming weeks.”
He says optimism remains high in the hog market. It’s becoming clear while the
heartbeat of expansion hasn’t stopped, the pulse is becoming weaker, Ellis adds.
“They have taken their foot off the gas pedal, and we’re seeing that with some of
the farrowing intentions numbers that indicate fewer pigs. I don’t think we are
going to reverse this any time soon, especially guys that have put up buildings.
“Futures prices look pretty good, and that’s what is driving this optimism.”
Because of the opportunity in the futures market, Ellis says producers might want
to consider locking in market prices.
“It looks pretty good from here out in the middle of the year, so I think producers
can hedge into prices at or above what we are getting now.”
While corn prices are high, he says producers need to look at locking in feed
needs.
“It’s not going to go down much, but at least you are able to put a pencil to it, lock
in those costs, and make it work. If you can lock in a profit, you probably want to
take a look at that.”
While consumer demand for pork has weakened slightly, Ellis says export
demand continues to be very strong.
“If we lose some domestic demand, we are offsetting that loss by picking up
other markets. Economies are growing in other countries. They want to buy
meat, and they’re willing to import it to have it.”