USDA Cattle on Feed Numbers Very Close to Trade Guesses

USDA Cattle on Feed Numbers Very Close to Trade Guesses

On-feed inventory and placements on the friendly side of estimates, but likely not enough to move markets

Friday's USDA Cattle on Feed Report showed June feedlots placements at 1.455 million 6% below 2013 and a tad below the average trade guess. Net placements were 1.38 million head. During June, placements of cattle and calves weighing less than 600 pounds were 400,000, 600-699 pounds were 245,000, 700-799 pounds were 320,000, and 800 pounds and greater were 490,000.  

n-feed inventory and placements on the friendly side of estimates

Cattle and calves on feed for slaughter market in feedlots with capacity of 1,000 or more head totaled 10.127 million head on July 1, 2014. The inventory was 2% below July 1, 2013 and a tad below the average trade guess.  The inventory included 6.46 million steers and steer calves, down 1% from the previous year. This group accounted for 64% of the total inventory. Heifers and heifer calves accounted for 3.60 million head, down 5% from 2013.

Marketings of fed cattle during June totaled 1.847 million, 2% below 2013 and very close to the average trade guess. This is the lowest fed cattle marketings for the month of June since the series began in 1996.

USDA also reported mid-year inventory estimates. The July 1 cattle inventory was down 3% from July 1, 2012

All cows and heifers that have calved, at 39.0 million, were down 2% from July 1, 2012.  Beef cows, at 29.7 million, were down 3% from July 1, 2012.  Beef replacement heifers, 4.1 million, down 2% from July 1, 2012.

The 2014 calf crop is expected to be 33.6 million, down 1% from 2013 and down 2% from 2012. Calves born during the first half of the year are estimated at 24.3 million, down 2% from 2013 and down 3% from 2012.

Most mid-year inventory numbers are compared to 2012 because USDA did not conduct the mid-year survey in 2013 due to budget constraints.

USDA Cattle on Feed Numbers Very Close to Trade Guesses

Seasonal slaughter peak a dimple, rather than a bulge. Fed cattle slaughter typically peaks in June or July. This year feedlots have been able to manage feedlot supplies, stay current on their marketings while at the same being able to push through the significant rise in December through February placements without a significant bulge in slaughter. Packers up to this point have found it increasingly difficult to bid down the market even as they have reduced slaughter rates. Beef cutouts rising record high give them dollars to pay record-high cash cattle prices.

Record-high cattle prices and record-high beef cutouts mean consumers will get no relief from record-high retail beef prices any times soon. Those record-high prices keep the market on edge. Some traders fear consumer resistance could kick in triggering a sharp correction in prices lower.

One old adage is the cure for high prices is high prices. Another is whatever the market does, it overdoes. Both could come into play.

Cow-calf producers have many options. Feeder cattle supplies remain tight. June placements, down 6%, suggest fed cattle supplies will not rise any time soon. And for good reasons. Cow-calf producers have ample options. Generally more favorable rains improved pasture conditions in June, allowing ranchers to hold on to some lighter calves. More importantly, good grazing and favorable cattle price prospects encourage them to retain heifers to expand cow herds. Heifers that go in breeding herds do not go into feedlots, which further tightens fed cattle supply down the road.

This year, placements slowed in early spring and May placements were down 7% compared to 2013.However, high feeder cattle prices have triggered a rise in feeder cattle imports from Mexico, which has bolstered supplies in the South.

Potential holiday squeeze. Cattle producers, futures traders, packers and end users are all scrutinizing placements and projected fed cattle supplies. Real concern exists that beef supplies could become extremely tight going into the holidays.

So far, U.S. consumers have shown that they prefer beef. Consumers are demonstrating that they are willing to pay for it. Getting adequate product supplies, avoiding consumer resistance and maintaining margins will become increasingly challenging for both retailers and restaurant operators.

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