US - Analysts polled ahead of the Friday USDA “Cattle on Feed” report on average expect the survey to show more cattle on feed than a year ago, write Steve Meyer and Len Steiner.
There is a notable range in the analyst survey conducted by Urner Barry over the weekend but that is not that unusual for this time of year.
Feedlot placements pick up in the fall and, as is often the case, there are differing opinions about how aggressive feedlots have been in placing cattle on feed and how that has impacted the overall supply of cattle as of November 1.
On average the analysts polled expect total on feed inventories to be up 2.2 per cent from a year ago. Both placements and marketings are expected to be lower than a year ago.
However, it is important to keep in mind the calendar differences, which tend to skew the year/year comparisons.
There were 22 slaughter days in October 2015 compared to 23 slaughter days in October 2014 and this difference likely impacted the flow of cattle in and out of feedlots.
All analysts polled expect placements to be lower than a year ago. Four out of the ten analysts polled expect placements to be down by more than 5 per cent compared to last year.
It should be noted that last year placements were quite large (2.368 MM) as good pasture conditions allowed producers to hold calves outside of feedlots a bit longer.
Placements this year have followed more or less the same pattern as a year ago and feed conditions have been quite similar. What is different, however, is that last year there was a lot more bullishness in the fed cattle market and that may have impacted feedlot willingness and/or ability to maintain the placement rate.
This would be the argument for placements being down 5,6 or even 7 per cent compared to a year ago. However, there are a couple of factors that may have limited the decline in October placements.
Both fed and feeder prices rebounded nicely for much of last month. November feeder cattle prices gained about $23/cwt between October 2 and October 23. April fed cattle prices during that time frame also gained about $10/cwt.
Feedlot margins certainly are compressed and nowhere close to what they were a year ago but market sentiment in October was certainly quite positive and that may have impacted feedlot operations. Feed costs also remain low.
One factor that tends to affect placements at the margin are imports of feeder cattle from Canada and Mexico.
During the four full weeks of October imports of feeder cattle from Mexico were 93,646 head (period Oct 4 - Oct 31), up 7,270 head (+8 per cent) compared to a year ago. However, this small increase in Mexican imports was more than offset by the sharp decline in imports of Canadian feeder cattle.
During this four week period US imports of Canadian feeder cattle were just 14,592 head, down 38,303 head (-72 per cent) compared to a year ago.
The net change in Canadian and Mexican feeder imports in October was a little over 31,000 head, which may appear small given placements are estimated at 2.276 million. Still, it could be enough to shave a little over 1 per cent from the estimated placements.
Feedlot marketings are currently forecast to be down 3.9 per cent compared to a year ago although a couple of analysts polled had marketings down only by a couple of percentage points.
As noted earlier marketings should be lower given there was one less slaughter day in October.
The USDA reported fed cattle slaughter for the month (these are estimates and may be revised) was 1.974 million head, down 4.6 per cent compared to a year ago.
The average of analyst estimates is generally in line with the USDA slaughter number at this point. Fed slaughter in October was as good as it could be expected and has helped reduce the backlog of cattle that was created over the summer months.
This was evidenced in the decline in fed cattle carcass weights. However, the inventory of cattle that have been on feed for more than 120 days remains quite large at this point.
Based on the analyst estimates, we calculate the supply of +120 day cattle at 3.418 million head, 17.7 per cent higher than a year ago. This larger supply will continue to pressure nearby cash markets, especially during times of year when retailers focus their features on seasonal items.
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