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CME: Cattle Placements Lowest in Over 10 Years

28 July 2009

US - CME's Daily Livestock Report for 27 July reports that June cattle placements were the lowest in over a decade, providing some support to out front cattle prices as feedlots continue to reduce potential beef supplies going into the year-end holiday season.

According to the USDA monthly survey of feedlots with more than 1000 head of cattle on feed, total placements in June were 1.391 million head, 127,000 head or 8.4 per cent less than a year ago. Prereport estimates were looking for a 7.1 per cent decline. The reduction in June placements follows sharply lower placements in May and early indications are that placements in July also will likely be well below year ago levels. The placement number was the smallest since April 1996.

In addition to placing significantly less cattle on feed than a year ago, the mix of cattle placed on feed also has changed. As the chart shows, the per centage of heavy weight cattle placed on feed in June was even larger than a year ago and well above the five year average for the month. The USDA survey showed that feedlots placed 415,000 head of cattle weighing 800 pounds or more in June, which constitutes 29.8 per cent of all cattle placed on feed. In the last five years, heavy cattle placements made up 27.2 per cent of the total. The trend towards placing heavier cattle on feed is not new, it has been going on for some time, first as a response to high priced feed and more recently due to a sharp decline in feeder demand.

Feeders are spending more time outside of feedlots, adding pounds and shortening the time needed to get them ready for market. The smaller proportion of light weight cattle implies that beef supplies towards the end of the year could be even smaller than the feedlot survey indicates (they’ll be ready earlier). It will be interesting if cow-calf producers continue to hold on to calves this fall and opt to sell them as yearlings. If that happens, it could further stretch out beef output and reduce supplies from a calf crop that is already one of the smallest in decades, possibly ever.

Much will depend on the economics of cattle feeding but also beef demand going into the fall and winter. Grain prices have pulled back sharply, which should in theory help feeder demand. Omaha cash corn prices for the week ending July 16 closed below $3 per bushel for the first time since the fall of 2006 and seasonally cash corn prices do not bottom out until harvest. Beef demand also could get some support from a recovering economy (still big ?? there), a weaker US$ and improving export markets.


Daily Livestock Report - Copyright © 2008 CME. All rights reserved.


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