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CME: COF Futures Hold Significant Spread Between April/Jun, Aug/Oct

25 February 2019

US - According to the (delayed) cattle on feed report published today, the total supply of cattle on feed in +1000 head capacity feedlots on 1 January was 11.690 million head, 1.7 percent higher than the previous year, reports Steiner Consulting Group, DLR Division, Inc.

This is lower than the average of analyst estimates that were put forward in late January and confirmed once again last week. On average analysts expected the total inventory to be up 2.3 percent compared to the previous year.

Analysts polled ahead of the report on average said they expected placements during December to be up 2 percent compared to the previous year. The USDA survey told us that placements during that month were down 1.8 percent compared to the previous year.

The reduction in placements is somewhat of a surprise given that the number of feeder cattle sold in the country in December was notably higher than a year ago. Also, seasonally placements are higher in December, which likely influenced analyst estimates.

Poor feedlot conditions negatively impacted placements during much of November and December and appear to have affected the placement rate. This was the fourth consecutive month that placements declined compared to the previous year.

Placements during Sep-Dec period were a combined 379,000 head under year ago levels and this is expected to affect the supply of market ready cattle that will be available this spring.

Futures currently hold a significant spread between April/Jun and Aug/Oct, a spread that largely reflects the reality of lower placements in the fall and early winter and the likelihood of higher placements this spring against both late summer and fall months.

Placements by weight category did not offer any clear signals. Placements of very light cattle (under 600lb.) were down 25k head or 5.3 percent compared to the previous year. On the other hand, placements of cattle between 600 and 800 pounds were just a few thousand head higher than last year.

Despite the lower inventory overall, the front end supply on 1 January was still quite large, which may help explain why fed cattle prices have been largely unchanged in recent weeks despite continued weather pressure and poor feedlot conditions.

The supply of cattle that on 1 January had spent more than 150 days on feed was 1.894 million head, 31 percent higher than the previous year while +120day cattle at 3.909 million head were 17.6 percent higher than a year ago.

The ratio of marketings to total inventory in December was a somewhat disappointing 15 percent considering the large front end supply. Expectations are for the marketing rate to jump to 16.4 percent in January.

The total inventory of beef, pork, chicken and turkey in cold storage at the end of December was estimated at 2.181 billion pounds, just 0.3 percent higher than a year ago but still 6.9 percent higher than the five year average.

Inventory of red meat and poultry declined 2.3 percent vs. previous month compared to an average increase of 0.8 percent in the last five years. This should be viewed as positive given the big increase in red meat and poultry production during the month of December.

The total inventory of pork products in cold storage at the end of December was 513.8 million pounds, 3.1 percent higher than a year ago but still 1.7 percent lower than the five year average. Pork inventories declined 0.4 percent from the previous month compared to an average drawdown in stocks during the past five years of around 2 percent.

The inventory of boneless beef and bone-in beef cuts at the end of December was 490.4 million pounds, 1.6 percent higher than a year ago and 1.1 percent higher than the five year average.

The supply of all chicken products in cold storage was 785.9 million pounds, 0.6 percent lower than the previous year but still 12.2 percent higher than the five year average.

Below, you can see the full details of this report. The Cold Storage report for January will be published on 7 March.


Daily Livestock Report - Copyright © 2008 CME. All rights reserved.


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