On-feed reactions varied
Market analysts were split on what USDA’s Aug. 1 Cattle-on-Feed Report meant for the near term fed cattle market. Although marketings were within the range of pre-report estimates, whether or not the numbers were favorable was questioned by analysts last week. However, analysts were in agreement that July placement numbers were small enough to support next spring’s fed market.
USDA’s National Agriculture Statistics Service said July marketings were 1.92 million head, slightly below 2004 and 16 percent below 2003. The USDA report noted July’s marketing figure was the lowest since the current on-feed data started being collected.
“Based on the number of slaughter days in July, feedlots marketed 95,900 head, compared to 91,700 head last year,” said Robb. “That is a 4.6 percent increase in the daily marketing rate this year, compared to last year.”
Greg Wagner, cattle market analyst with E-Hedger, Chicago, IL, told WLJ that when all is said and done “the marketing figure is probably a wash.” Instead, Wagner focused on the fact that the market continues to be fairly steady amidst a myriad of negative influences.
“The market has weathered BSE, the Canadian cattle trade situation and several other outside forces, and amidst it all, we haven’t seen any major softness the past several weeks,” Wagner said. “I don’t see the on-feed data, particularly marketings, having that much impact in the broad scheme of things near-term.”
In addition, Robb said that last month’s marketing rate was enough to reduce the rate at which animals on feed 120 days or more are accumulating.
“As of July 1, the number of cattle on feed more than 120 days was 10 percent higher than a year ago. However, as of Aug. 1, that figure was only 8 percent more than last year,” said Robb. “We still have a lot of heavy cattle out there, but it’s not as bad as it could be.”
The Aug. 1 number of cattle on feed more than 120 days was 3.071 million head, compared to 2.836 million head last year.
Despite the 120 day supply being smaller than a month ago, Reed Marquotte, M&Z Livestock Analytics, said the front-end supply of cattle is a problem.
“We are talking about one-and-a-half weeks worth of fed cattle being pushed on the market right now,” said Marquotte. “We are already near
See On-feed on page
record finishing weights, and we still have another couple of weeks before the normal peak happens. In addition, beef demand is still lackluster. The combination doesn’t appear to bode well for prices the next few weeks.”
Andy Gottschalk, analyst with HedgersEdge agreed, saying if marketing deficits aren’t corrected, the problem will lead to a record front-end fed cattle supply by Oct. 1.
Placements good news
While there were differing opinions on the meaning of July marketing figures, analysts were more consistent in their optimism concerning feedlot placements.
NASS said that placements during July totaled 1.68 million head, two percent below last year and 16 percent fewer than 2003. The July number is the lowest placement figure for the month since the on-feed data series began in 1996.
“With extremely hot, dry weather affecting the southern half of the country last month, it was conceivable for placements of heavier cattle to have been a lot larger than they were,” said Robb.
Marquotte said that the unexpected slide in heavy weight placements was a direct result of cattle feeding margins being $100 or more per head in the red.
“Yes, prices for feeder cattle remain at a very high level historically. However, a lot of that has to do with cattle being forward bought for delivery later this year.” said Marquotte.
During July, placements of cattle and calves weighing less than 600 pounds were 400,000, 600-699 pounds were 338,000, 700-799 pounds were 465,000, and 800 pounds and greater were 475,000.
Cattle futures markets last week weren’t showing a lot of movement either way, which meant last week’s on-feed report was largely neutral, analysts said.
“When looking at it in retrospect, we will probably see this report as being not even a blip on the radar when it comes to market activity or movement,” concluded Wagner. — Steven D. Vetter, WLJ Editor
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