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CME: Cattle Inventory Expected to be Above Last Year's

22 April 2016

US - The April Cattle on Feed report will be published on Friday by USDA-NASS, write Steve Meyer and Len Steiner.

Industry analyst pre-report estimates show a strong consensus that marketings, placements, and inventory will be above year ago numbers.

See the table below for the range and average pre-report industry estimates. March of 2016 had one extra slaughter day than March of 2015, this accounts for about a 5 per cent increase in marketings year-over-year.

Based on the average estimated marketings, this means on a daily rate (adjusting for the extra slaughter day) March this year marketed about 1 per cent to 2 per cent more cattle than 2015.

This is still good news for the industry as it continues to help move feedlots towards being more current.

On the placement side, the main assessment is “up” and the average of pre-report estimates shows up about 7 per cent year-over-year.

Generally, March is not a large placement month, i.e. placements could be up 3 per cent or 11 per cent and it does not impact the cattle on feed inventory number very much (holding marketings constant).

Other factors influencing this placement estimate are: reduced feeder cattle imports year-over-year, feeder animals still on wheat pasture, an extra slaughter day this year, and continued feeding losses.

For March, feeder cattle imports from Mexico and Canada were down about 20 per cent total (down 37,000 head) year-over-year. For more discussion on feeder cattle imports see yesterday’s DLR.

Those 37,000 head difference in feeder cattle imports accounted for about 2 per cent of March 2015’s placements.

With a growing supply of feeder animals available out in the country, and lower prices year-over-year, there were plenty of US animal to compensate for the lack of feeder imports.

Conversely, anecdotal reports have said more feeder cattle are still out on wheat pasture right now.

This could be a shift of animals out of the burned areas in Kansas and Oklahoma to available pasture. Or, the impact of some untimely frost that damaged wheat fields which could have motivated producers to graze out wheat instead of remove cattle in time to still have a grain crop.

If there are more animals on wheat pasture, this would argue in favour of the lower end of the placement estimate range. Overall, watch for continued or emerging trends within the placement data.

We think this will include continuing to see more heavy animals placed generally, but also more light animals placed than we saw last year.

Additionally, the number of cattle on feed over 120 days will be a key number to watch and will provide more information regarding the distribution of fat cattle supplies for the coming months.

April 1 cattle on feed inventory is expected to be up between 0.1 per cent and 1.5 per cent year-over-year. That is not a huge year-over-year increase.

Moving on to a quick recap of the cattle markets this week, futures were limit down Monday on both live and feeder cattle.

A fundamental reason for this could be disappointment in cash trades last Friday, on a week of strength in the cutout value. However, boxes lost almost $2.50 per cwt. by Tuesday afternoon this week compared to last Friday.

The USDA-AMS daily slaughter cattle price report showed some limited cash fed cattle trades at $125 per cwt. live on Tuesday afternoon.

Some of the downward movement in the futures contracts could be more technically based, but these declining cash prices came as a surprise in a market that should still be seasonally strong.

This could indicate some oversupply issues, we will see what the COF report says in that regard, on Friday.

TheCattleSite News Desk

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