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CME: September Feed Inventory Down On Estimates

27 September 2011

US - USDA issued on Friday, 24 September, the results of its monthly survey of feedlots that on 1 September had 1000 or more cattle on feed. The results of the survey will likely be viewed as bullish by futures markets when they open on Monday, writes Steve Meyer and Len Steiner.

The most critical number in the report was the supply of cattle placed on feed during August and the resulting total supply of cattle on feed going forward.

Both those numbers were sharply lower compared to pre-report estimates and a reminder that while month to month on feed supplies can fluctuate, long run beef production is determined by the size of the beef cow herd and resulting calf crop.

Below are some of the highlights:

  • The number of cattle placed on feed during August was reported at 2.252 million head, 0.8 per cent lower than a year ago. Prior to the report analysts were expecting the report to show August placements up 7.7 per cent from a year ago. This implies that producers placed 194,000 fewer cattle on feed than expected.

  • Cattle marketings in August were pegged at 2.048 million head, 6.5 per cent more than a year ago. Pre-report estimates were for marketings to increase 5.7 per cent. Cattle marketings were higher than a year ago due to one more marketing day in August.

  • The combination of lower placements and higher marketings contributed to a total inventory on 1 September that was significantly lower than previously expected. Total on feed supplies on 1 September were noted at 10.721 million head, 5.3 per cent more than a year ago. Prereport estimates expected inventories to show a 7.9 per cent increase over last year.

The USDA 1 September on feed inventory was about a quarter of a million head smaller than pre-report estimates indicated.

The number of light feeder cattle (under 600 pounds) placed on feed in August was up 220,000 head or 44 per cent compared to a year ago.

About two thirds of the increase in light feeder placements came from Texas. But the effects of a smaller calf crop are starting to show up. As producers have been placing cattle on feed earlier than normal, the August supply of heavy cattle available for placement was a lot tighter than a year ago.

Across the board, we saw a significant decline in the number of heavier cattle placed on feed. The data shows that placements of cattle over 700 pounds were down 208,000 head compared to a year ago, offsetting the increase in light cattle placements.

As The cattle on feed inventory is a good indicator of the flow of cattle into the market but the actual supply is determined by the number of cows on the ground and that number has been shrinking for sometime. Given the heavy liquidation of cows in the Southern Plains, the beef cow herd will likely be even smaller come 1 January, 2012, leading to lower calf crops in 2012 and 2013.

Further Reading

- You can view the full report by clicking here.

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