May 24, 2011

 

US cattle volumes might end tight this year

 

 

There is a likelihood that supplies of fattened cattle will be very tight in the US towards the year-end, in spite of an increase in placements in April at double the speed the market anticipated, a leading analyst said.

 

Prices of live cattle for those ready for slaughter tumbled the maximum daily limit in Chicago to a five-month low on data showing the number of animals placed for finishing in US feedlots jumping 9.9% last month.

 

The rise was way above a market forecast of a 4.3% increase, and put placements at nearly 1.8 million head, the second-highest April figure since the USDA began publishing this data series in 1996.

 

Market sentiment was further damaged by separate statistics showing a rise of 20% on year to 442.8 million pounds, the highest figure for 37 years, in the amount of beef in cold storage as of the start of this month.

 

"We have nothing but bad news as we start another week of trading in cattle. Logs in the cattle are throwing in the towel," a broker said.

 

However, another economist said that the robust growth in placements could not continue given the declines in feeder cattle. Those suitable for putting into feedlots, identified in separate USDA sector inventory reports, and falls in US calf numbers.

 

An alternative was that the inventory data themselves would prove erroneous.

 

With the cattle placed on feedlots last month set to come ready for slaughter in October, there was still potential for numbers of fattened animals to dip into Christmas.

 

The economist said that he still expected the "supplies are going to get very tight idea" to come true later this year.

 

The jump in April's placements was attributed in part to the deterioration of pasture conditions in America's drought-struck southern states, responsible for about one-third of the US cattle herd, and where winter wheat crops and cotton sowings have also suffered.

 

Placements in Kansas surged by 21%, Texas increased by 28% and in Oklahoma, where some areas are suffering drier conditions than during the 1930s Dustbowl, rose by 33%, as farmers gave up on grass-finishing their animals.

 

Higher supplies from Mexico also played a role, although they do not go anywhere near close to explaining all the difference between the actual USDA number and market expectations, the economist said.

 

Live cattle for June stood down the daily exchange limit of US$0.03 at US$1.01975 a pound in late deals, their lowest since the run up to Christmas, and down 17% from last month's record high.

 

Later lots, up to and including next year's April contract, stood limit down too.