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CME: Cattle on Feed and Cold Storage Both Down

25 June 2013

US - USDA released its monthly updates on US cattle on feed inventories as of June 1 as well as cold storage ending stocks as of May 31. Below are some of the highlights from the latest reports and some of the implications for markets going forward, write Steve Meyer and Len Steiner

Cattle on Feed: Feedlots placed more cattle on feed than expected in May. May placements were 2.049 million head, 1.7 per cent  less than a year ago but more than pre-report which were looking for a 3.1 per cent decline. We started the year with a larger supply of feeders outside of feedlots than the year prior and this has showed up in the number of cattle placed on feed this past spring.

For the period Jan - May, US feedlots placed a total of 9.056 million head of cattle on feed, 98,000 head more than a year ago. High feed costs and poor feeding margins slowed down the flow of cattle into feedlots late last year and earlier this year.

The cattle placed on feed have also been heavier than a year ago. The May survey showed that placements of feeders over 800 pounds were up 20 per cent compared to a year ago while placements of calves under 600 pounds declined 25 per cent from last year.

Marketings in May were down 3.4 per cent , compared to pre-report estimates for a 2.1 per cent decline. The June 1 cattle on feed inventory was 10.736 million head was 2.1 per cent lower than a year ago but 0.4 percentage points higher than pre-report estimates.

The report implies that there will be a few more cattle coming to market in the last four months of the year than previously expected. Placements of heavier cattle imply the additional pounds will be skewed more towards the front of the holiday season (late Sep – Oct).

However, the market has been buoyed recently on speculation that high pork and chicken prices could push retailers and foodservice operators to feature more beef during the year end holiday season. When it’s all said and done, demand remains THE critical factor for beef prices.

Cold Storage: Inventories of beef cuts in cold storage were down 41 per cent vs year ago while boneless beef stocks were up 2.3 per cent vs. year ago. We think the increase in boneless beef stocks reflects more
imported beef and also more lean beef supplies than a year ago but this is just speculation as unfortunately the USDA data is a complete black box with regard to beef freezer stocks.

Total beef supplies in cold storage were down 3.9 per cent vs. year ago but above the five year average. Pork inventories were up 4.1 per cent  from a year ago and also 18.4 per cent higher than the five year average.

Inventories of hams remain quite high and this may limit the upside in the ham market this fall. Ham stocks as of May 31 were 156.6 million pounds, 21 per cent higher than a year ago.

Boneless beef hams are up 43 per cent from a year ago. Belly stocks are down 17 per cent  from last year, reflecting the tight supplies and record high prices for pork bellies. Supplies of chicken breasts are down 3 per cent from last year while wing supplies remain burdensome, up 121 per cent from a year ago.

Total broiler inventories at 679.3 million pounds were 6 per cent higher than a year ago. Total turkey inventories were 519.6 million pounds, up 4 per cent . Ham stocks are burdensome at this point. While prices have advanced recently on higher prices for pork trim, once hot dog and sausage demand wanes, hams could find it more difficult to continue to climb in the fall.

Turkey breast supplies are declining. Sharp cutbacks in turkey poult placements and the seasonal improvement in demand normally support turkey breast prices in the second half of the year.


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