August 16, 2007

 

US cattle placement drop seen; marketing increase

 

 

Analysts anticipate the US Department of Agriculture's upcoming monthly cattle-on-feed report will show decreased July placement and increased marketing figures.

 

USDA's cattle-on-feed data is scheduled for release on Friday (August 17) at 3 p.m. EDT (1900 GMT).

 

The Dow Jones Newswires monthly survey of market analysts projected an Aug. 1 average on-feed number at 96.1 percent compared with a year ago. This was derived from a range of 94.3 percent to 97.5 percent.

 

July's cattle placements were estimated from 77.5 percent to 95.0 percent with a 86.9 percent average. The animals marketed in July category drew a 102.6 percent average based on a 100.0 percent to 105.0 percent range.

 

A cattle broker characterized last month's cattle-on-feed results as "shocking" because of the much-lower-than-expected placement outcome, and he expects some of that bullishness to linger into Friday's data. It is doubtful whether the industry will see a placement number close to July's report given corn prices that are at their lowest levels this year, he said.

 

As usual, the broker said, the report's impact on live cattle contracts should be minimized by traders "goosing up" cattle futures before the data's release. That, he said, will reduce the chance of a strong bullish post-report reaction.

 

Don Roose, analyst with US Commodities, said Friday's report could offer positive back-month cattle influence because there are signs that people kept cattle and calves in a growth stage rather than driving them to feedlots.

 

By the same token, said Roose, the number of animals outside feedlots is larger than a year ago, suggesting there is a "pool" of cattle that could actually increase placements, compared with last year, as the industry moves forward.

 

University of Missouri economist Ron Plain offered an 89.2 percent placement estimate based on "unusually large" placements in July 2006. However, he said, a backlog of cattle may be developing as a result of placements this year that are running around 3 percent below a year ago.

 

"So big placements a year ago and better grazing increases the likelihood that we're going to be down placement-wise this year," said Plain.

 

Dan Vaught, A.G. Edwards & Sons' market analyst, said moderately higher July fed cattle prices, and corn's significant late-June early-July plunge probably encouraged feedyard managers to accelerate replacement yearling purchases. That may produce a placement figure slightly below last year's number - or a difference of about 5 percent, he said.

 

Vaught believes marketings last month exceeded the year-ago figure by 4 percent because cattle packing plants operated one more work day last month than in July 2006.