Feed Lot

APR 2013

Feedlots and cow/calf operations in the beef industry who feed 500 or more has annually on grains and concentrates; maintain 500 or more beef cows; backgrounder, stocker/grower, preconditioner; veterinarian, nutritionist, consultant

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MARKETING BY LUKE SCHWIETERMAN An interesting market is taking shape The number of cattle on feed at the end of February was reported by the USDA to be seven percent lower than a year ago. That would be the smallest number on feed since 2003. Cattle placed on feed during February was only 86% of a year ago with average trade estimates before the report at 91%. Placements would be considered a bullish surprise and supportive of the price in August. Marketing���s were only 93% of a year ago, nearly as expected by the trade. We view the report as friendly prices for all months but particularly a confirmation of lower production going forward. USDA in the March Supply and Demand report indicated prices for 1st quarter cattle at 124-127, 2nd quarter at 124-130, 3rd quarter at 125-135 and 4th quarter at 127-137. We expect USDA will have to revise the 3rd and 4th quarter prices higher in the April report based on the new cattle on feed data. For the last several weeks, beef cutouts have been pushing the all-time record highs then selling off. The trade rationalizes that demand cannot or will not accept higher prices. However, we think resistance is being felt in the marketplace by the wholesale trade rather than the retail trade. It can be argued that retail price resistance has not been tested adequately. We���ve been bullish the cattle market for several years now. It appears that we may be entering the time over the next several months where shortages in beef cattle become a realization. Should slaughter cattle weights begin to decline along with fewer cattle going to slaughter and demand picking up due to warmer weather, things could get interesting quickly. As it should, because producers are looking at close outs with large losses. Price must improve to allow producers to continue raising cattle since it will do the industry no good to run producers out of business. Looking at feed availability, we think producers should consider this year as being a transition year between the drought and normalized weather patterns. In our view this year���s corn crop will be contingent on timely rains in the Corn Belt. Even with short subsoil, the trade knows that a fair crop can be raised with frequent rains. All eyes will be on the weather maps this year for sure and worry about pollination occurring during the hottest part of the summer is not too far away. We advise having put options purchased to cover cattle being fed. Although we think price will improve over the coming months the political and economic climate makes the risk to the downside a real concern. Corn call options would be a wise trade on pull backs. We are being led to believe that corn production will be plentiful for new crop however, with the corn seed still in the bag, we think the market FL maybe too optimistic. This material has been prepared by a sales or trading employee or agent of Schwieterman, Inc. and is, or is in the nature of, a solicitation. This material is not a research report prepared by Schwieterman, Inc. Research Department. The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. The information contained herein is based on data obtained from recognized statistical services and other sources believed to be reliable. However, such information has not been verified by us, and we do not make any representations as to the accuracy or completeness. All statements contained herein are current opinions which are subject to change. You may visit our web site at www.upthelimit.com. Specializing In: ��� Turn-Key Feedyard Construction ��� Hog Site Construction ��� Complete Dairy Construction ��� Sprinkler System ��� CAD Design ��� GPS Survey ��� Slipform Concrete Feedbunks ��� Dirtwork of All Types ��� Laser-Equipped Machinery ��� All types of Fencing Phone: 800-536-2634 maxjantzexcavating.com Circle No. 123 on Reply 24 FEED���LOT April/May 2013

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