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CME: August COF Placements Larger than last Year

21 September 2009

US - USDA’s monthly Cattle On Feed report, released Friday afternoon, shows continuing lower inventories of cattle in US feedlots and somewhat larger-than-expected August placements, write Steve Meyer and Len Steiner in their Daily Livestock Report for 18 September 2009.

The key data from the report appear in the table below. Please note that both the 1 September feedlot inventory and August marketings were quite close to pre-report estimates. The higher-than-expected placement numbers could put some pressure on deferred futures at Monday’s open.

USDA Cattle on Feed Report Summary: September 2009
  Thous. Hd. 2009 as Pct. of 2008
2008 2009 Actual Estimate Difference
On Feed, 1 September 9,997 9,882 98.8 98.5 0.3
Placed on Feed in August 2,061 2,110 102.4 100.9 1.5
Fed Cattle Marketed in August 1,884 1,810 96.1 95.3 0.8
*DowJones Newswire

US feedlots with capacities of 1000 head or more held 9.882 million head of cattle on 1 September, 1.2 per cent lower than last year and 2.5 per cent higher than the revised figure (9.637 million, adjusted downward slightly from 9.644 million) for 1 August. The month-to-month increase was a bit larger than the normal seasonal pattern.

August placements of 2.11 million head were 2.4 per cent larger than last year and 1.5 per cent higher than the average of analysts’ prereport estimates. And the cattle placed in August were heavy by historical standards (see graph below). The average weight of August placements was 717.7 pounds, 3.1 pounds lower than last year but over 20 pounds heavier than the ‘03-’07 average. High placement weights in 2008 were primarily a function of high feed costs. While still significantly higher than the historical average, it is pretty hard to blame feed costs for this year’s August surge,. We suspect that moderate summer temperatures and better-than-normal pasture conditions contributed to excellent growth rates for yearlings on pasture this summer, driving placement weights higher. Whatever the driver, these heavy cattle placed in August will keep slaughter weights high in the first quarter of 2010 — much like this year’s first quarter when both steers and heifers averaged over 40 pounds heavier than the ‘03-’07 average.

This report also contained one item that is strictly a function of the blood-letting that has occurred in the cattle feeding sector: No state-level data is included in the September report for New Mexico. The reason is that several New Mexico feedyards have closed. The state’s cattle feedyards were held in just a few hands to start with and the closures mean that data from New Mexico no longer meet USDA’s confidentiality conditions. Omitting New Mexico screws up the state subset data (12 states in its recent configuration) once more unless USDA can put the New Mexico data with Texas or Oklahoma. We don’t know if that is possible or advisable but discontinuities in data series are almost always bad and market participants really do not need more complications at this point in time.

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

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