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Feeder cattle-a buy?

Agriculture.com Staff 08/21/2009 @ 6:00pm

If the cattle cycle has any historical relevance, the feeder cattle market should be presenting buy opportunities over the next one to three years, especially on setbacks. With corn prices sliding the last month, feeder cattle prices have found support. A bullish key reversal last week, followed by higher prices this week, could also be suggesting a longer term buy.

The key to the feeder market holding current prices or moving higher is two-fold. First, from an input standpoint, is the availability of grain. With what appears to be a large corn crop, there should be no shortfall of feed products. The cost of feed will be the lowest in two years. The second part of the equation is live cattle futures. If deferred futures can hold above $90 in the April and beyond, calf prices will become more valuable into the fall and early winter. The long term supply of calves also indicates supply will be tight. From a technical standpoint, the market looks poised to make a move to the topside. After correcting downward the last month, prices have consolidated and now appear to be ready to move upward and possibly challenge contract highs $3.00 to $4.00 higher. The incentive will come from a stronger fed market.

Demand will come from the advantage to feed corn through cattle rather than sell it. Over the past couple of years, many farmers have indicated to us that they would rather sell corn than risk putting cattle in their yard. Ultimately, this suggests a greater demand for feeder cattle.

The real key to the entire cattle complex may be the economy. If the economy has, in fact, turned the corner and retail demand builds on a more consistent basis both domestically and on the export front, beef could once again see a resurgence. Live cattle prices could move to the mid to upper $90s.

If you have questions or comments, contact Bryan Doherty at Top Farmer, 1-800-TOP-FARM ext. 129.

If the cattle cycle has any historical relevance, the feeder cattle market should be presenting buy opportunities over the next one to three years, especially on setbacks. With corn prices sliding the last month, feeder cattle prices have found support. A bullish key reversal last week, followed by higher prices this week, could also be suggesting a longer term buy.

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