I posted a link up in marketing about the cwt' s tenth round buyout. I have scoured over the web to find comments from some of the first to talk about these things usually. I can't find any? Is this a big deal only to me? I just veiw this as extremmly bullish. I don't think it will hurt beef prices over the long haul and I don't think that it will dramatically change our product output I just think with so many factors moning in a bullish direction one day it will lead to a blowoff. I will say that the highs may have more of a corelation to the heat this summer than to how many cows get sold. It could be real interesting. Oh by the way Deans Foods just recieved a BB rating they have lots of term debt about to come due and the rating group says their forecast is for higher wholesale product prices. What do you think ? JR
Re: Cwt Buyout
Extremely bullish for what? Are you talking milk prices? I don't know if it will hurt beef prices that much or not but it looks like the bloom is definitely coming off anyway and we are in our seasonal slide. Cattle numbers are still going to be pretty manageable until late summer and then they will increase. Packers seem to have producers on the run right now and have them willing to sell cattle about $10 below select beef prices. If you're hedged the basis is good but profitability is going away fast. Lots of forward contract supplies to pull from in the coming months. Now that the packer has leverage I think they will use them to their advantage. They are still making sick money.
Spec funds are in a big liquidation mode in cattle futures right now and that is a big negative. The scales could be tipped to the sell side until most or all of that position is liquidated. I think you will see June futures hit $88 before they go off and I think August and October will eventually trade down close to $85 before it is all said and done.
Cattle coming in heavy off of wheat pasture to the feedyards and I would expect that when the grass cattle start coming in late summer they will be heavy too because the grass is great everywhere. Mother nature was not very kind to cattle performances this past winter but it looks like she could make up for things going forward.
Re: Cwt Buyout
zman, yes I meant milk prices but I also don't think beef gets hurt real bad going forward either.
Interesting thoughts about cattle coming off grass heavier. Heres a thought if they get pulled forward like you suggest, won't that be bullish for after the frst of the year? Some are estimating that we may be only able to remove 100,000 head from this it may not be enough and t noon it doesn't seem to add to the bullishness yet. JR
Re: Cwt Buyout
We don't know bidding starts this week and runs through June 25. CWT doesn't hae alot of money and they are capping the bid a $3.75/cwt. so I don't think it will be anything but psychological. It won't hurt the cattle market as cows which are accepted won't be culled until the end of JULY or the begining of August if the time frame from past rounds is used. Teh bigger deal in the cattle mkts. will be heat in the summer.