Grimes and Plain Weekly Cattle Outlook

CHICAGO - Jan 19/07 - SNS -- Following is a week ending cattle market comment from the University of Missouri - Columbia's Glenn Grimes and Ron Plain.

The USDA final estimate for the 2006 corn crop was not good news for the cattle industry. On Friday January 12, USDA released the January estimate of the 2006 corn crop and reduced the crop from 10.745 billion bushels to 10.535 billion bushels. The market responded with a limit up or near limit up for all corn future prices.

USDA increased the 2006-2007 marketing crop year price by $0.10 per bushel to an average price of $3.20 per bushel.

For the period of 1908-1942 corn prices averaged $0.78 per bushel, for 1942-1972 the average corn price was $1.26 per bushel and from 1973-2005 the average corn price was $2.37 per bushel.

The probabilities appear high for another step up in prices for several years. If corn prices increase in future years by the percentage of the average of the two previous step ups we will have corn prices above $4.00 per bushel for the next period.

In the 70's, when we had the last major move up in corn prices prior to the indicated current move, meat consumption declined for 3-4 years, then leveled off for 8-9 years, then started climbing again.

USDA also reduced the 2006 soybean crop by 16 million bushels.

These higher corn prices will continue to exert downward pressure on feeder cattle prices. Because of the winter storm last weekend Oklahoma City did not hold a feeder cattle sale this week.

Remember for each $0.10 per bushel increase in corn prices 400-pound feeder cattle prices will be influenced negatively by about $1.00 per cwt. For 600-pound feeders the decline in price per cwt will amount to about $0.75 with all other costs held constant.

Fed cattle trade was slow to develop again this week with only 38,135 thousand head in the negotiated trade through Thursday.

The weighted average live prices for fed cattle in the negotiated trade for the five-market area at $86.97 per cwt was down $0.53 per cwt from a week earlier. The negotiated carcass trade for the five-market area showed the price down $0.85 per cwt at $139.80 per cwt.

Wholesale beef prices Friday morning had Choice beef at $153.10 per cwt, down $1.70 per cwt from a week earlier. Select beef at $141.18 per cwt was up $1.12 per cwt from 7 days earlier.

Cattle slaughter this week under Federal Inspection was estimated at 613 thousand head, up 1.3% from a year earlier.

Issued by Glenn Grimes and Ron Plain

University of Missouri - Columbia

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