December 22, 2008
US cattle-on-feed report given mixed reviews
The US Department of Agriculture's monthly cattle-on-feed report Friday (December 19) was given narrowly mixed calls, with market analysts saying weather conditions could play a larger role in Monday's market performance than the report.
"There is nothing that I can see in this report that is going to move the market on Monday," a cattle trader said. "Traders will be focused more on Friday's remaining cash sales and winter weather in the Plains."
There was no real change in the pattern of placements from previous reports, said Robin Fuller, president of Tallgrass Consulting. The focus for cattle feeders is to place the larger yearling cattle and to leave the calves on pasture.
The number of cattle marketed during November was 91 percent of a year earlier, a little more than the 88.8 percent pre-release estimate by market analysts. This is not really all that large, she said, and it says there is a fair number of cattle coming to market in the next couple of months before supplies tighten appreciably.
Richard Nelson, livestock market analyst at Allendale Inc., said his calculations did not show that slightly larger supply coming to market in the next couple of months. The market has very tight supplies of slaughter-ready cattle right now, he said, and these supplies will remain tight through April.
The cattle markets were poised for a sharp rally "on any sign of a bottom in the economy," he said. Some contract months are projecting cash cattle prices that would be well below the cash price of a year earlier.
According to Nelson, the report verifies his thoughts that those contract months could scramble to recoup much of the difference between current traded values and last year's cash prices quickly if the economy were to bottom.
Ron Plain, a University of Missouri livestock economist, saw nothing "terribly surprising" about the US government's monthly cattle results.
November's 95 percent placements figure was a shade higher than expected, but marketings at 91 percent also exceeded expectations, said Plain. On the other hand, the 94 percent on-feed number came in nearly on target with the average trade estimate.
He pointed out that USDA's total placements result for the first 11 months of 2008 was down 4.8 percent compared with a year ago, which was a more significant decline than some had expected. He said this makes one wonder if USDA might revise downward the size of the 2007 calf crop at some point.
Dan Vaught, an analyst with Wachovia Securities, said since the marketings and placement figures exceeded average forecasts, the outcome may benefit bull spreads.
The relatively large marketing figure may offer a bit of support for the nearby contracts, whereas the comparatively large placement total may weigh somewhat on the deferred futures, said Vaught.
Cash cattle's outcome could play a role on how December and February move Monday, particularly if frigid temperatures blanket the Midwest as expected, said Vaught. US equities may influence live cattle on Monday as well, he said.