Heifer demand expected to growWritten by Jennifer Womack
Amidst all the cattle work come thoughts of present day markets and the months that lie ahead. Despite this year’s challenges, Omaha, Neb.-based cattle market guru Walt Hackney sees good times ahead.
“The feedlots are becoming current,” says Hackney. “We’re on the verge of seeing a few more greener cattle on the show lists. I don’t know if the average carcass weight it going to lighten. A lot of heavy cattle went into the feedlots and they’re going to be part of the current position in the feedlots. They’re going to have plenty of weight, but they’re not overfed by any means.” Hackney predicts that the majority of feedlots will be “current” by late September.
Going into the fourth quarter, Hackney expects fat cattle to trade in the $88-90/cwt. range. “A lot of analysts are talking $90, but the problem there is the economy.” The good news, Hackney says he believes fat cattle have reached their low point. “The consumer is avoiding beef prime cuts at their current price and demand certainly needs to be a lot better to bring the price of cattle to something like $90.”
In the Omaha area, Hackney says New York strip steaks and T-bones are selling for $7 to $8 a pound while a full boneless pork loin is under $3 a pound. “It’s pretty obvious what the budget conscious consumer is going to buy.”
Given current corn prices, Hackney estimates that feeders are doing a little better than break-even. “$83 to $84 is the magic number for profits in most cases,” he says. “This crop of cattle that we’re currently marketing, they haven’t enjoyed the full drop in corn prices. Part of their early rations were still at a pretty significant price on corn. The new cattle that are going in, they’re going to get a better advantage with the cheaper corn prices.”
“Cheaper gains are certainly going to help us, but it could also come back to haunt us,” says Hackney. “It’s kind of the habit of the cattle feeder that if he gets into some cheap rations and the market doesn’t really respond to his liking, he’ll find a way to stay with those cattle, sometimes for a little too long and increase tonnage too much.”
Hackney expects the choice, select spread to begin widening given the “greener inventory” of cattle. “The average grade in the choice cattle is going to become a little bit less and it’s probably going to increase the spread and the advantage will go onto the choice.”
Speaking to those selling feeder cattle, Hackney says, “I don’t see where there’s any particular advantage for a rancher to contemplate holding the cattle, weaning or carrying them over the winter anticipating higher markets. I think the market is good enough now and I think it will continue. I’d advise them to continue selling into the market. Generally speaking, I think the cattle will make some money for the rancher in the current market.”
“I think replacement heifers are going to bring a premium,” says Hackney of the months ahead. “I think there will be a slow and gradual rebuilding of the cowherd. A lot of the analysts indicate the herd is in balance with beef demand. But, as the economy improves the demand for beef will move and we’ll want to look at more cattle available, for sure as we go into 2011.” Hackney says he doesn’t yet see a decline in the number of heifers destined for feeder channels.
“Our entire industry is consumer driven,” says Hackney. “The economy dictates any significant moves the markets make. That’s been the problem. The consumer’s budget hasn’t warranted a real aggressive pick-up of the product. Our hope is that improves and we should in fact see an improvement in beef demand and a subsequent improvement in the markets.”
“If the economy wasn’t an issue, we’d have $90 or better fat cattle,” says Hackney.