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Weekly US Cattle Outlook: Cattle Inventory Disappointing

08 February 2010
Ron Plain
Ron Plain

US - Weekly Cattle Outlook, 5th February 2010, a weekly review of the US cattle industry, written by Glenn Grimes and Ron Plain.

USDA’s January survey of the nation’s cattle inventory was a bit disappointing. Although cattle numbers are down from a year earlier, the decline is less than the trade had been expecting. USDA said we started 2010 with 1.1 per cent fewer beef cows, 2.7 per cent fewer milk cows and 0.9 per cent fewer total cattle, than the year before. The inventory of steers over 500 pounds was down two per cent; the inventory of heifers over 500 pounds not being kept for breeding was up 0.8 per cent; and the inventory of calves weighing less than 500 pounds was unchanged from January 2009. The 2009 calf crop was down 0.9 per cent compared to 2008 and was the smallest calf crop since 1950. Based on cow inventory and bred heifer numbers, it looks like the 2010 calf crop will be down roughly 1.1 per cent. The total number of cattle on feed was down 1.5 per cent. The January cattle on feed report said numbers in large, 1000 head plus feedlots was down 2 per cent compared to January 1, 2009. All the inventory numbers point towards a tightening beef supply. Cattle prices should jump when beef demand starts to improve.

Choice boxed beef cutout values declined for the third week in a row. On Friday morning, the choice carcase cutout value was $1.3762/pound, down 3.01 cents for the week and 7.62 cents lower than three weeks ago. The select cutout was down 2.28 cents from the previous Friday to $1.3548 per pound. The choice-select price spread is only 2.14 cents. This spread was small last year and continues to be well below average in 2010.

Despite the weaker cutout values, fed cattle prices were steady to a bit higher this week. The 5-area daily weighted average price for slaughter steers sold through Thursday on a live weight basis was $83.74/cwt, up 28 cents from a week earlier and $2.74 higher than a year ago. Steers sold on a dressed basis averaged $136.34/cwt, 70 cents higher than the week before and $5.27 higher than the same week of 2009.

The February live cattle futures contract ended the week at $87.42/cwt, up $1.62 for the week. April settled at $90.40, up $1.03 from the week before. June settled at $88.10/cwt and the August live cattle contract ended the week at $87.35.

Federally inspected cattle slaughter for this week is 642,000 head, up 2.7 per cent compared to a year ago. Cattle slaughter has been above year-earlier levels for 9 of the last 10 weeks. Placements of cattle into feedlots last fall imply fed cattle slaughter will average above year-ago through the rest of the winter. On the positive side, steer carcase weights have been below year-earlier levels for 12 of the last 13 weeks.

Cash bids for feeder cattle were mostly steady to higher this week. Oklahoma City didn’t have a feeder cattle auction this week because of ice and snow.

Feeder cattle futures were lower this week. The March contract ended the week at $98.32/cwt, down 55 cents from last Friday. April lost $1.33 this week to settle at $99.67/cwt.

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