US - USDA released on Friday the results of its monthly surveys covering feedlots with +1000 head capacity (fed cattle supply) and the survey of refrigerated warehouses (freezer/cooler stocks).
USDA also released its monthly production statistics for the month of August but for now we will only focus on the latest survey results and cover the supply statistics in a later report.
Cattle on Feed: For the most part the survey results were in line with pre-report estimates and we think futures markets participants will view the results as neutral to slightly bearish for cattle that will be marketed in Q1 of next year.
The total number of cattle placed on feed in August was 1.879 million head, 247,000 head (+15.1 per cent) higher than a year ago and about 2 points higher than the average of analysts. As has been the case for much of this year, cattle placements continue to skew heavy, necessitating the need on the part of feedlots to stay aggressive in their marketings.
Placements of cattle over 800 pounds in August were 800,000 head, 140,000 head more than in August 2015 (+21.2 per cent). Placements of cattle between 700 and 799 pounds were 429,000 head, 67,000 head more (+18.5 per cent) than a year ago.
On the other hand, placements of cattle under 600 pounds were down 35,000 head (‐8.9 per cent).
There were two extra marketing days in August, which bolstered the supply of cattle feedlots were able to send to market. Total marketings for the month were 1.868 million head, 280,000 head (+17.6 per cent) higher than a year ago. The strong marketings pace has allowed feedlots to get more current than a year ago, with the supply of +120 day cattle now estimated at 3.270, 9.3 per cent less than a year ago but still notably larger than in 2014 and 2013 (see chart).
Steer weights are tracking 16 pounds (-1.7 per cent) under last year at this time, further evidence of more current feedlot supplies. But even as front end supplies become more current, we do not see any risk of a marketing hole developing anytime soon.
Packers have been content to run heavy on Saturday as long as they have a strong margin to work with but, as we saw last week, they can quickly pull back if they start to see cutout values deteriorating. So far both middle meats and value cuts have held up well given the slaughter pace.
Cold Storage inventories of beef, pork, chicken and turkey at the end of August were 2.389 billion pounds, 0.3 per cent higher than a year ago and 8.8 per cent higher than the five-year average.
The inventory drawdown from the previous month was 1.4 per cent when normally we see a 0.4 per cent decline, a positive indicator for meat demand especially given the big increases in production across all species.
Lower chicken stocks were the primary reason for the larger than normal drawdown in stocks, as all chicken inventories at the end of August were 773.7 million pounds, down 6.1 per cent from the previous month and the biggest drawdown in chicken stocks since July of 2011.
Breast meat inventories continue to track about 12 per cent above last year and 29.6 per cent higher than the five-year average. However, stronger exports are helping clean up the inventory of dark meat, with stocks of leg quarters declining 8.8 per cent from the previous month in August and now 9.5 per cent lower than a year ago. As for beef and pork, we thought the picture was a bit mixed.
Boneless beef stocks normally decline in August and September but instead they are moving higher, in part because we think some cheap fat trim is going into the freezer. This will limit the upside for 50CL beef in October and November.
Pork inventories in August increased 1.4 per cent compared to an average pace of +2 per cent, a rather positive number. However, ham stocks increased at a faster pace and we see this as bearish for Q4.
TheCattleSite News Desk