Market Summary

Slaughter bulls steady. Slaughter cows down $2-3. It would be perfectly reasonable to expect this market to decline by $10-20 over the next 75 days. Because of tightness of supply this decline may not be as pronounced as usual. Yearlings and calves are record high. The producers, me included, that marketed cattle as recent as a month ago are noticing that the market has rallied as much as $500 per head!  It is reasonable at this point to budget around $3300 per calf for this fall. So what has caused this huge rally in price?    On july 25 fat cattle futures settled at $223 US and then proceeded to rally to a high of $243 by Sept 3! This alone added close to $450 CDN per head to every calf and yearling. Also, feed grains continue to decline rapidly in both countries as a record crop is starting to be harvested. The cost of gain has dipped by close to $0.10 per pound.  This will add about $60 per head to the yearlings and $100 per head to the calves (roughly!).  These 2 factors account for most of the increase in value of the calves and yearlings.  On top of that add some bullishness, as the reality of lower supplies ahead becomes realized and the bull  market story starts to fully play out.  To summarize, the market still makes sense.  It’s just that we’re squeezing every last penny of value out of them. I still believe that higher highs are ahead of us but just at a slower pace. Fundamentals are very sound and look to be very good for at least the next 18-24 months. Hold on! It’s going to be a ride. Ian

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