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CME: On Feed Report Looks Bearish

22 May 2013

US - Friday's cattle on feed report will be viewed as slightly bearish although contained no huge surprises, write Steve Meyer and Len Steiner.

The report contained no huge surprised by April placements exceeded the average pre-report estimate by about 3 per cent, suggesting that there may be some pressure on August and October live cattle. The key data from Friday’ report appear at right. Some highlights and implications are:

  • Total May 1 inventory of cattle in lots with capacities of 1000 head and more was 10.735 million head, 3.4 per cent lower than last year’s 11.110 million head. That is the ninth straight month in which inventories have been lower than one year earlier. It is, however, the smallest year-on-year decline since October.
  • April placements numbered 1.75 million head, up a whopping 15 per cent from last year and, as noted, 3 per cent higher than the average pre-report estimate. Remember, though, that April placements last year were the lowest since 2002 making any comparison look very large. This year’s 1.75 million is only slightly smaller than the 1.785 million placed in April 2011, though, and that figures was the largest since 2003’s 1.87 million head.
  • Readers should note that there was one more business day in April this year versus 2012. Adjusting for that extra day would leave per-day placements up only about 10 per cent from last year.

  • The average weight of cattle placed in April was 728.9 pounds, 23.7 pounds or 3.4 per cent higher than one year ago. These are very big cattle as that average weight is the fifth highest monthly figures since 2003. April’s average weight was over 20 pounds higher than the average for April for 2007-2011.
  • The average was driven by placements that were decidedly skewed toward heavy cattle with 800-pound and over placements growing by 21 per cent versus 2012 and 700-799 pound placements growing by 20 per cent . High feed prices have created plenty of incentives to put weight on cattle OUTSIDE of feedlots.
  • A HUGE question that will not be answered for some time is “How many of those big cattle were heifers that had been intended for beef cow replacements?” Ranchers were holding about 2 per cent more of those animals on January 1 but pasture conditions in the west are still very poor, meaning some of those heifers may already be moving into the feeder supply. The trouble is that we won’t know much about that until January since the July 1 Cattle report has been suspended by USDA.

Bottom Line

More big cattle on feed will mean more big cattle harvested this fall. Will the economy — and thus consumer demand and spending on beef — be strong enough to support cattle prices? That is the critical question moving forward for beef.


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