canadian angus
Well-known member
OCTOBER 2, 2008
Cattle futures tumbled to limit down prices in both live and feeder contracts. Cattle owners caved to market pressures, mostly from financial turmoil and sold cattle at $97 or two dollars lower than last week. In the north a few cattle traded at $97-98 or steady with last week. The Senate passed a bailout package and the markets may respond positively. House members regrouped and promise a vote on Friday. Most cattle offered for sale in the southern plains are priced at $101.
Box prices softened at mid week with choice holding steady and select dropping somewhat. Choice cuts leveled out at $155 and select at $148. Choice cuts posted large losses last week and traders expect the market to hold ground this week. The choice select spread was at $6.
In Oklahoma City cash prices for feeder cattle fell $5-8 in the largest drop of the year. Supplies are building outside feedyards and there appears to be little demand for filling empty pens. A few bids of $102 were available for 750# cattle on the southern plains.
Corn prices continued lower on Tuesday following the release of a USDA revised corn stock report raising the inventory of corn on hand. Primary in the calculation is a reduction in the last quarter of usage of corn as smaller numbers of cattle and poultry are fed. The basis on the southern plains was 50 over the December contract. Corn is now pricing into most rations at $10.50 cwt..
CREDIT WOES
The market action was at once impossible to miss but difficult to explain. Hidden from view of most Americans were trading patterns that only the most sophisticated traders could understand. The Donald Trump adage that "cash was king" was never more true. However, those with cash were not willing to put it at risk and companies and individuals rushed to the safety of government securities like treasury bills even those the best they would receive would be the promise of a return of their principal with only a token of interest. Those with cash were not in the mood to extend credit or assume any credit risk.
A freezing up of credit is the direct result of the mortgage crisis and the government bail out may alleviate much of the problems, but as of now, the credit markets are drying up. The implications cover everything from your payroll check to where and how the city, in which you live, meets its daily money needs. More importantly for those in the ag sector, where large credit needs are a fundamental part of the landscape, is access to the billions of dollars in production loans necessary for growing cattle and crops. The credit crisis is a direct assault on this country's ability to provide food to every person in the country.
For those with solid equity in their operations, they can expect credit to continue to be available and in some instances the rates to remain low as the government backed bonds fund many ag operations. For those with more questionable or risky balance sheets, credit will definitely tighten. The cost of money for operations carrying extra risk will skyrocket. Troubled meat companies are currently facing financing problems. Pilgrims Pride announced a bad bet on corn prices and troubles with loan covenants late this past week. Pilgrims is joined by many other meat companies facing higher borrowing cost as reflected in current bond quotes and future concessions necessary to raise more capital or debt. It is a costly time to go to the market for capital or debt as our country's premier investment bank, Goldman Sachs, found out when it called on Warren Buffett to assist them with a loan.
Hedge funds are developing more global strategies based on the advent of tight credit in the ag sector. Some have been shorting feeder futures with the thought that small ranchers and farmers will be forced to liquidate herds. Others are betting meat sales will slow with the economy and there will be pressure on prices resulting in less corn consumed by cattle, pork and poultry.
No sector has more at stake in the bailout plan than production agriculture. No cattle owner wants to take a credit risk when selling their cattle. Knowing the buyer and their financial condition will become critical to future transactions. Stocker operators will want to check the financial condition of the feedyard purchasing their cattle. Some grain trading companies have tightened controls and selling terms to feedyards. Feedyards in turn will be more concerned in the future in verifying the financial soundness of the beef plants where they choose to market their cattle. Sellers of ag products will come to recognize that a check in hand is not the same as collected funds. Clearing periods will speed up and assumptions of credit worthiness will be subject to verification.
This was taken from AgCenter, The Cattle Report. Oh dear all ouy stck markets are down.
CA
Cattle futures tumbled to limit down prices in both live and feeder contracts. Cattle owners caved to market pressures, mostly from financial turmoil and sold cattle at $97 or two dollars lower than last week. In the north a few cattle traded at $97-98 or steady with last week. The Senate passed a bailout package and the markets may respond positively. House members regrouped and promise a vote on Friday. Most cattle offered for sale in the southern plains are priced at $101.
Box prices softened at mid week with choice holding steady and select dropping somewhat. Choice cuts leveled out at $155 and select at $148. Choice cuts posted large losses last week and traders expect the market to hold ground this week. The choice select spread was at $6.
In Oklahoma City cash prices for feeder cattle fell $5-8 in the largest drop of the year. Supplies are building outside feedyards and there appears to be little demand for filling empty pens. A few bids of $102 were available for 750# cattle on the southern plains.
Corn prices continued lower on Tuesday following the release of a USDA revised corn stock report raising the inventory of corn on hand. Primary in the calculation is a reduction in the last quarter of usage of corn as smaller numbers of cattle and poultry are fed. The basis on the southern plains was 50 over the December contract. Corn is now pricing into most rations at $10.50 cwt..
CREDIT WOES
The market action was at once impossible to miss but difficult to explain. Hidden from view of most Americans were trading patterns that only the most sophisticated traders could understand. The Donald Trump adage that "cash was king" was never more true. However, those with cash were not willing to put it at risk and companies and individuals rushed to the safety of government securities like treasury bills even those the best they would receive would be the promise of a return of their principal with only a token of interest. Those with cash were not in the mood to extend credit or assume any credit risk.
A freezing up of credit is the direct result of the mortgage crisis and the government bail out may alleviate much of the problems, but as of now, the credit markets are drying up. The implications cover everything from your payroll check to where and how the city, in which you live, meets its daily money needs. More importantly for those in the ag sector, where large credit needs are a fundamental part of the landscape, is access to the billions of dollars in production loans necessary for growing cattle and crops. The credit crisis is a direct assault on this country's ability to provide food to every person in the country.
For those with solid equity in their operations, they can expect credit to continue to be available and in some instances the rates to remain low as the government backed bonds fund many ag operations. For those with more questionable or risky balance sheets, credit will definitely tighten. The cost of money for operations carrying extra risk will skyrocket. Troubled meat companies are currently facing financing problems. Pilgrims Pride announced a bad bet on corn prices and troubles with loan covenants late this past week. Pilgrims is joined by many other meat companies facing higher borrowing cost as reflected in current bond quotes and future concessions necessary to raise more capital or debt. It is a costly time to go to the market for capital or debt as our country's premier investment bank, Goldman Sachs, found out when it called on Warren Buffett to assist them with a loan.
Hedge funds are developing more global strategies based on the advent of tight credit in the ag sector. Some have been shorting feeder futures with the thought that small ranchers and farmers will be forced to liquidate herds. Others are betting meat sales will slow with the economy and there will be pressure on prices resulting in less corn consumed by cattle, pork and poultry.
No sector has more at stake in the bailout plan than production agriculture. No cattle owner wants to take a credit risk when selling their cattle. Knowing the buyer and their financial condition will become critical to future transactions. Stocker operators will want to check the financial condition of the feedyard purchasing their cattle. Some grain trading companies have tightened controls and selling terms to feedyards. Feedyards in turn will be more concerned in the future in verifying the financial soundness of the beef plants where they choose to market their cattle. Sellers of ag products will come to recognize that a check in hand is not the same as collected funds. Clearing periods will speed up and assumptions of credit worthiness will be subject to verification.
This was taken from AgCenter, The Cattle Report. Oh dear all ouy stck markets are down.
CA
