Friday's USDA Cattle on Feed Report should have little impact on post Christmas markets.
Feedlots told USDA they had 2% more cattle on feed Dec. 1 than a year ago. The average trade guess was up 1.9%.
November placements came in at 92% of November 2005. Traders on average expected placements to be 90.6% of a year ago. One concern is placements of cattle weighing more than 700 pounds were up 4%. That may boost March and April fed cattle marketings above previous expectations which would be a tad bearish for spring fed cattle futures.
November marketings were up 6%. That was at the top end of the trade's range of up 1.6% to up 6%, but fairly close to the average expectation of up 4.6%. Strong marketings suggest feedlots are keeping current in response to high feeding costs.
Corn cost crunch
Sharply stronger corn basis in the Southern Plains and higher corn futures prices translate into costs of gain in the upper $0.80 to $0.90 per pound level to finish yearling steers.
"With feeder cattle prices well above a $1 and cost of gain running near or above the current fed steer price, feedlots are barely covering variable costs, if they are," says Len Steiner, Steiner Consulting,
What are the potential outcomes? First, corn prices and basis could return to more historical levels. Given ethanol- driven corn demand and higher transportation costs, that isn't likely any time soon, especially with growing supplies of ethanol coproduct feeds in the western
"Second, Southern Plains cattle feeders can seek alternative rations that are more competitive," says Steiner. "But they've already been looking.
"The third option is cattle feeding may start an escalating migration to the North," he says. "The Southern Plains have a weather advantage. The western
CanFax's monthly estimate of cattle on feed in
Placements were 33% smaller than last year's record level and 3% lower than the 2000-2004 average. Lower placements and 14% higher marketings drove the inventory lower.