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CME: November Cattle on Feed Estimates Lower Than 2014

18 December 2015

US - USDA’s National Agricultural Statistics Service (NASS) are releasing their monthly Cattle on Feed report this week, write Steve Meyer and Len Steiner.

For reference purposes, two key graphics using data from prior reports are included with this article: cattle on feed and placement of animals into feedlots.

The next report will report will provide an on-feed count as of 1 December and for the month of November head placed and marketed, using surveys of all US feedlots with a capacity of 1000 head or more. Those surveys are voluntary.

On Friday, market watchers will focus on the number of head placed compared to a year ago. The table provided here, showing the average of industry analyst pre report estimates compiled by Urner Barry, has head placed into feedlots during November below a year ago (95.7 per cent of 2014’s) or 1.7117 million head.

That continues the trend of the prior three months and most of this year of year-on-year declines in placements. Note that the range of pre report estimates is rather wide (from 92.0 to 100.0 per cent of a year ago).

Some other compilations of pre report estimates have a bit wider range and a slightly larger year-over-year drop in cattle placed. The next most important statistic in the NASS report will be how many cattle were placed in the heavyweight category (feeder animals weighing 800 pounds and over).

So far this year, that category has been at or above 2014’s every month. Cattle entering feedlots in that weight category have two important market impacts: 1) of the animals placed in a given month, they will tend to reach market weight earliest; and 2) historically, cattle placed at heavy weights result in bigger carcass weights than those entering feedlots at lighter weights.

In recent months, very heavy carcasses have boosted beef production, pressuring the wholesale beef market and in turn fed cattle prices.

Delayed fed cattle marketings for month-after-month were a key contributor to the current market situation of volatile and lower prices. So, the number of head marketed compared to a year ago will be scrutinised.

But that requires more than a cursory look at the report. There was one more slaughter day in November of this year than in 2014 (this year there were 20 days versus 19 last year).

The average of pre report estimates was 103.3 per cent of a year ago or 1.519 million head. However, adjusting for that one day gives a more comparable marketing number of 1.443 million head or 98.0 per cent of 2014’s.

Compared to a year earlier, the cattle marketing rate during November was higher than in many recent months, but did not take care of the full backlog of over finished animals. However, if marketings are reported over the pre-report average, more progress occurred than anticipated.

The 1 December on-feed inventory is expected to be 0.9 per cent above a year ago, importantly, that would be the smallest year-over-year increase since June of this year (1 November was up 2.1 per cent).

Watch the placement data as the major uncertainty going into the report, that statistic could be smaller than anticipated, cattle feeders have never lost the amounts of money they have in recent months.

If marketings come in rather high and placements low, the report could easily be termed bullish. The cattle and beef markets have not seen that term used lately.

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

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