Placement weights increase

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Dec 16, 2008
Placement weights increase

Cattle on Feed (from page 1)

The much anticipated tight supply of market-ready fed cattle is expected to begin hitting the markets during October and if demandside numbers can remain steady or increase in the face of currently questionable economic conditions, cash fed cattle prices could begin to climb as expected as the market works its way through the month into winter. The Sept. 1 Cattle on Feed report showed an overall decline in the number of cattle on feed. According to USDA’s National Agricultural Statistics Service (NASS), cattle on feed in feedlots with a capacity of 1,000 head or more totaled 10 million head, down 3 percent from the same date last year and 9 percent below Sept. 1, 2006.

Total on feed numbers have been inching lower in nearly all major cattle feeding states over much of 2008 as tight or negative feeding margins take their toll on the industry. During August, only three states posted an increase in the number of cattle on feed, with New Mexico posting the largest gain, an increase of 27 percent.

Arizona numbers increased 4 percent and Nebraska on feed numbers grew by 2 percent. States posting the biggest declines were Texas and California, falling 6 percent and 5 percent, respectively.

The much anticipated tight supply of marketready fed cattle is expected to begin hitting the markets during October and if demand-side numbers can remain steady or increase in the face of currently questionable economic conditions, cash fed cattle prices could begin to climb as expected as the market works its way through the month into winter.

HedgersEdge.com analyst Andy Gottschalk said the shift in front-end fed cattle supplies from Sept. 1 to Dec. 1, 2008, represents the largest decline in recent years and ranks second only to the sharp decline recorded in 1996. “This decline is the result of the ... 668,000 head cumulative decline in placements since March 2008,” he noted. “Tightest fed cattle supplies should be realized during the fourth quarter. Adverse winter weather could extend this tight supply through the first quarter of 2009. The impact of adverse winter weather will be more pronounced than normal, since front-end fed cattle will become very current as we enter the heart of winter.”

According to NASS, placements of cattle during August also declined 3 percent below year-earlier figures, totaling 2.06 million head. That figure was 10 percent lower than August 2006. Net placements reached 2.01 million head, the second lowest placement figure since 1996. The trend in placement weights shows the trend toward heavier placement weights continues. During August, placements of cattle weighing 700 pounds was reported at 930,000 head, which would be a decline of 155,000 head, or 17 percent, from last year. Placements of cattle weighing 700 pounds and more reached 1.189 million head, an increase of 97,000 head, or 8 percent, from last year, according to Vetterkind Cattle Brokerage analyst Troy Vetterkind.

“The increase in heavier weight placements last month would make some sense as we begin to see yearling cattle coming off of grass enter the feedlot mix, and the market is still giving incentives to keep light weight cattle out of feed yards and on some sort of backgrounding program to put cheap gain on before entering a finishing yard,” he said. Marketings during the month of August declined sharply as expected, Vetterkind said, noting that numbers came in very near analysts’ pre-report expectations. Marketings of fed cattle during August totaled 1.88 million, 9 percent below 2007 and 2006. This was the lowest number of fed cattle marketings for the month of August since the series began in 1996. “Part of the reason for the lower marketing figure can be found in a couple less slaughter days this year when compared to next, and we overall have less cattle on feed compared to last year and we are seeing fewer Canadian fed cattle imports recently when compared to last year,” Vetterkind said. “It’s not to say that marketings couldn’t be a little more current though, as we are seeing plenty of heavy cattle in the slaughter mix in the northern feeding sections of the country.”

He pointed out the drop in on feed numbers in the south as compared to those in the north, which rose as an indication that those heavier fed cattle and larger numbers would need to be cleaned up before cash prices could advance much higher than current levels. “On feed numbers in Kansas, Oklahoma and Texas are running 98 percent, 98 percent and 94 percent of a year ago, respectively,” he said. “Numbers on feed in Nebraska are running 102 percent of a year ago, confirming we still need to be marketing cattle more aggressively in the north.” — John Robinson, WLJ Editor

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