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CME: US Cattle on Feed Placements Lower Than Expected

26 July 2016

US - USDA‐NASS released their Cattle on Feed report on Friday, and the surprising number was placements, write Steve Meyer and Len Steiner.

According to the report, June placements were up 3.0 per cent, June marketings were up 9.4 per cent, and the July cattle on feed inventory was 1.2 per cent above year ago (see table below).

Industry analysts, on average, had expected placements to be 6.5 per cent above year ago. Reflecting on June, feeder cattle prices were lacklustre and estimated feeding margins decreased from May (although were still significantly better than year ago).

Pasture and range conditions across most of the US were still rather favourable, although slightly drier than year ago. Additionally, imports of feeder cattle from Mexico were down 33,000 head compared to June of 2015.

These factors all combine to help explain the lower than expected placement number, which provides a slightly bullish tone to the industry.

To review the first 6 months of 2016, total placements were 5 per cent above 2015’s, or up 560,000 head. According to the January Cattle Inventory report, as of the first of the year an additional 690,000 steers over 500 pounds were available out in the country.

Obviously, we have not included heifers in this analysis but just analysing the increase in placements compared to the increase in supply of available feeder steers it does look like the industry has made significant headway into feeder steer supply.

Unfortunately, USDA-NASS did not publish a mid-year Cattle Inventory review this year due to budget reasons, so we will not have a published statistic for a fist cut on 2016's calf crop.

Other news in placements includes the continued trend of placing heavier weight feeders. The 800 pound and up category of placements increased 17 per cent year-over-year, the mid weight categories (600-700 and 700-800 pounds) were up 2 per cent and 1 per cent, respectively, and the under 600 pound category was down 17 per cent.

In terms of looking ahead, seasonally we expect feeder cattle prices to increase into the fourth quarter.

With favourable pasture conditions, these animals may stay out on grass longer in hopes of improved prices. Marketings in June were up an impressive 9.4 per cent.

Based on fed cattle prices, packers are not having issues covering their elevated weekly slaughter levels. Marketings have continued to stay high through the first part of July.

This would indicate that placements will have to continue above year ago levels to restock empty bunk space, and hopefully provide some price support to feeder cattle into fall and winter.

These numbers wrap up to a July 1 cattle on feed inventory that was 1.2 per cent above year ago. Not an overly burdensome inventory for the industry by any means, but still allowing packers to cover their high slaughter levels.

This Cattle on Feed report also included quarterly numbers spliƫng out steer and heifer feedlot inventory. Steer inventory for July was 0.6 per cent below year ago.

Again, representing the elevated level of marketings that have offset our increased placement level.

Heifer inventory for July was 5 per cent above year ago (up 160,000 head). This increase was generally expected, and does indicate some slowdown in national beef cattle herd growth.

Additionally, heifers on feed as a percent of total feedlot inventory, were 34 per cent. This is up from 32 per cent a year ago, but still below 2014’s level of 36 per cent. For perspective, during the drought induced cattle liquidation, we saw heifers making up 39 per cent of feedlot inventory.

TheCattleSite News Desk

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