Weekly US Cattle Outlook - Cattle on Feed Lower
US - Weekly Cattle Outlook, 27th June 2008 - Weekly review of the US cattle industry, written by Glenn Grimes and Ron Plain.Ron Plain
The Cattle on Feed report for June 1 came in a little lower than the trade estimates. Placements of cattle on feed during May were down 12 percent, the trade estimate was for a 9.6 percent decline. Marketing of fed cattle during May was up 2.6 percent from last year. The trade estimate was for an increase in fed cattle marketing of 1.7 percent from 2007. These smaller placement and larger markets resulted in the on-feed number being down 4.1 percent compared to a trade estimate of 2.8 percent
The futures market reacted with the nearby June contract and the October contract being up but all other contracts closed Monday below the Friday closes. Apparently, the people in the pits were trading a more bullish situation than USDA reported.
The weights of cattle placed on feed showed the largest reduction in cattle weighing less than 600 pounds, which was down in placements by 19.1 percent from a year earlier. The number of cattle placed weighing 600-699 pounds was down 6.4 percent, the number placed weighing 700-799 was down 12.6 percent and the number of cattle placed weighing 800-pounds-or-more was down 10.4 percent.
Cattle feeders have the ability to even out fed cattle marketings relative to placements, sometimes by several percentage points.
We still believe the probabilities are very low for fed cattle prices to rally $16 per cwt by October or about 17 percent from the current market in the futures.
The futures market at the close Monday for the October contract was at $116 per cwt. Last October prices were between $92 and $93 per cwt. To get a cash price of $114 in October this year would require a decline in production of fed cattle by about 12 percent from last year. The probabilities of a 12 percent decrease in October fed cattle numbers from October of 2007 are very low.
Placements of cattle on feed during April and May were down less than eight percent. Remember, placements of cattle on feed fluctuate much more than marketings.
Consumer demand for beef for January - May of this year was down 3.2 percent from a year earlier. However, due to larger exports of beef, the demand for live fed cattle for January - May was up 1.3 percent from 12 months earlier.
Demand for beef at the consumer level appears to be impacted more than the competing meats. Demand for pork for January - May was up 1.2 percent. We still do not have the data to calculate broiler and turkey demand through May, but both showed modest growth for January - April compared to 2007.
At Oklahoma City this week, feeder steers and heifers were $2-3 higher but steers and heifer calves were not well tested. Comparisons are to last week.
The prices by weight groups for medium and large frame number one steers were: 485 pounds $122 per cwt, 500-600 pounds $116-123.50 per cwt, 600-700 pounds $110.25-117.50 per cwt, 700-800 pounds were $108-112.75 per cwt and 800-1,000 pounds $101-112 per cwt.
Choice wholesale beef this Friday morning at $166.78 per cwt was up $7.66 per cwt from a week earlier. Select beef at $160.31 per cwt was up $6.65 per cwt from seven days earlier. Slaughter this week under Federal Inspection was estimated at 709 thousand head, up 1.4 percent from a year earlier.
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