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CME: Cattle on Feed Placements Up 7 Per Cent in April

24 May 2016

US - The Cattle on Feed report was released by USDA-NASS on Friday. Placements surprised analysts, compared to the range of pre-report estimates, write Steve Meyer and Len Steiner.

Placements were up 7 per cent year-over-year in April, and this was with one less slaughter day compared to 2015. Regionally, the majority of the increase took place in the Southern Plains.

Reflecting on last year, placements during April of 2015 were notably smaller than previous years, especially in the Southern Plains states. This provides at least some justification for the regional increase year-over-year.

It appears that improved cattle feeding margins, stemming from improved and more historically “normal” feeder and fed cattle price relationships, has feeders filling up their bunk space more aggressively than previously thought.

This year-over-year increase in placements during the past three months (February through April) suggests that fed cattle prices could see some downward pressure as we get into the fourth quarter of 2016, from an increased supply standpoint.

Within placement weight categories, all weight breakouts saw year-over-year increases except the 600-699 pound group (down 7 per cent). The 700-799 pound and 800+ pound categories experienced the largest increase, percentage wise, year-over-year.

While this has been a common trend since mid-2014, the industry is not experiencing the back up of cattle like it did this year.

This trend of heavier placements seems to be due to cattle feeders’ preference to bring in heavier weight animals as they are usually heartier and require fewer days on feed.

April’s placement number was the highest for the US and Texas, since 2013. Moving on, April marketings were up 1 per cent year-over-year.

This is especially impressive (although not surprising) given the one less slaughter day in April 2016 compared to 2015. On a daily average marketing rate, April was up almost 6 per cent year-over-year.

This was the second month in a row of daily average marketings that were above year ago numbers.

Combining placements and marketings, the cattle on feed inventory as of May 1st was 1 per cent above a year ago. One major trend that has continued is the decrease in inventory of cattle on feed over 120 days, now 5 per cent below year ago levels for April.

This is consistent with the increased marketings and steer dressed weights that have continued to seasonally decrease. This large increase in marketings could provide some price support for fed cattle in the near future (June/July).

Overall, even though we had set ourselves up for a surprise in placements, due to the narrow range of pre-report estimates, this did not drastically change the cattle on feed inventory.

April is seasonally a small placement month, and the difference we are talking about between the average placement estimate and the actual placement number was about 141,000 head.

Changing topics to a quick weekly update, steer dressed weights decreased again and fell below year ago levels for the first time since mid-June of 2014. 

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