December 16, 2010

 

US cattle on feedlot soars at three-year high

 

 

November cattle on US feedlots climbed by 5% as compared with last year, but the placements were partly offset by a surge in marketing, which rose nearly 10%, analysts said.

 

The analysts said that, despite the sharp increase in marketing from a year ago, cattle supply at feedlots rose by 2.6% as of December 1 to the highest in three years as producers tried to cash in on the high prices for cattle in cash markets.

 

Bob Price, president of North America Risk Management Services Inc., said, "Total cattle on feed numbers continue to run at the highest levels since 2007. This is happening in the face of high corn prices and tight feeder cattle supplies," adding that it would be the seventh monthly increase in feedlot supply.

 

"Corn prices dipped lower in November, and that encouraged feedyards to keep placing cattle, even though feeder cattle prices rallied sharply during the month," he continued.

 

USDA will issue its monthly cattle-on-feed report on Friday (Dec 17) at 2 p.m. CST (2000 GMT).

 

For complete trade forecasts of US feedlot cattle supplies as of December 1, as well estimates for November cattle placements and marketing.

 

"Fed cattle prices, basis Texas-Oklahoma, averaged 99.12 (cents per lb) in November, versus US$0.8560 a year ago," said Elaine Johnson of CattleHedging.com.

 

But the placement number was exaggerated by a low placement number of 92% last year versus the previous year.

 

"Last year's figure was the lowest since 2004 and second lowest of the series," said Daniel Bluntzer, director of research at Frontier Risk Management.

 

Some of the increase in placements could also be attributed to poor wheat pasture conditions. The US winter wheat crop entered dormancy with the lowest late-November rating in three years amid a lack of rain, especially in the southern Plains.

 

"We're not in great shape in wheat pasture, which is probably helping boost placements. Sometimes in the fall we have great wheat pasture, and that gives calves some place to go other than to feedlots," said Ron Plain, livestock economist at the University of Missouri.

 

But marketings, possibly the second highest on record since the series started in December 1995, and one extra marketing day during November, which adds 4-5% to the year-to-year change, partly offset the large placements.

 

"The marketing number looks like its going to be the highest since 2000 and in this data series it will be the second highest on record. The marketings were up because we had very strong fed cattle prices," Plain said.

 

Analysts said that estimates for cattle that have been on feed for 120 days or more as of December 1 ranged from 97-97.5% of last year.