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Growing Cattle Herd Means Continued Strong Demand for Corn

The March 13 daily livestock report, sponsored by the CME Group, indicated beef production through March 11 was 3.6% larger than a year ago. This report also indicated that year-to-date cow slaughter is down 6.1% and, perhaps most interesting, average dressed weight for the past week was 820 pounds, down from 834 pounds a year ago. A quick summary would suggest that producers are not shipping cows and are pulling fed cattle ahead due to higher cash prices compared with futures. Yet, with April futures well below current cash prices, the expectation is for an increased supply of market animals in the weeks ahead.

Bottom line, the numbers suggest the herd is continuing to grow. A growing herd means continued and stronger demand for corn. Part of the reason the cattle herd may be growing is ample and inexpensive projected supplies of corn, especially in the western Corn Belt. As demand grows, there is less room for error with the upcoming crop. In other words, corn is a relatively cheaply priced commodity, more so after prices slid this past week.

If you are an end user, you should be prepared to more aggressively buy corn or use call options to defend against higher corn prices. The majority of the world’s corn is produced in the Northern Hemisphere and, therefore, with growing demand, weather for the upcoming crop will be a critical factor determining crop size and ultimately prices. In a very short period of time, corn supplies could go from record large to too tight.

If one can accurately outguess the weather, then one can likely guess price direction. Rather than try to guess either, we suggest being prepared in case prices do make a substantial rally due to weather consequences. Consider buying out-of-the-money September and December corn calls against future purchases of corn. Or, with prices still below the cost of production, book supplies for the rest of the year.


If you have questions or comments, contact Bryan at Top Farmer Intelligence (800-TOP-FARM, ext. 129).

Futures trading is not for everyone. The risk of loss in trading is substantial. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Past performance is not necessarily indicative of future results.

Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Hypothetical performance results have many inherent limitations. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. No representation is being made that scenario planning, strategy or discipline will guarantee success or profits. The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Reproduction of this information without prior written permission is prohibited. This material has been prepared by a sales or trading employee or agent of Stewart-Peterson and is, or is in the nature of, a solicitation. Any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Stewart-Peterson. Stewart-Peterson refers to Stewart-Peterson Group Inc. and Stewart-Peterson Inc. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of National Futures Association. Stewart-Peterson Inc. is a publishing company. A customer may have relationships with both companies. Accordingly this email is sent on behalf of the company or companies providing the services discussed in the email.


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