October 26, 2011
Cattle on feed report: Unexpected gain for US market
USDA reported the second highest October 1 US cattle inventory since 1996 and a rise in cattle placed on feed in September although analysts were expecting a decline.
In its monthly Cattle on Feed report released on Friday (Oct 21) afternoon, USDA reported an increase of 0.2% in cattle placed on feed during September. Analysts, on average, were expecting placements to decline by about 3.5%, compared to a year ago.
USDA reported cattle and calves on feed for slaughter in the US for feedlots with capacity of 1,000 or more head totalled 11.3million head on October 1, up 5% from a year ago and about 1% higher than what analysts were expecting.
The report was seen as bearish for spring and summer cattle prices, according the CME Group's Daily Livestock Report (DLR).
Marketing during September came in slightly higher than a year ago and in line with analysts' expectations.
The DLR also noted that average placement weights increased to 712.7 pounds, a sharp increase from August to September. While that average weight is aligned with the five-year average, it is still nearly 14 pounds lower than one year ago.
The report showed a more normal pattern of placements without much obvious drought impact, according to Oklahoma State University Extension Livestock Marketing Specialist Derrell Peel. In his Cow/Calf Corner newsletter, Peel noted that overall, placements were even with a year ago and enough to hold cattle on feed totals even with last month at 105% of year ago levels.
However, feedlot inventories should begin to drop for the remainder of the year and into next year, he predicted.
J.P.Morgan analyst, Ken Goldman, agreed. "This should help relieve the rise in cattle prices that has hurt industry packing margins of late," he wrote in a note to investors. "At some point, after some drought-stricken ranchers have run out of animals to sell, we believe the number of cattle on feed likely will fall, but for now the trend has been upward."