US - Analysts polled in the last few days by Urner Barry indicate that they expect the November 1 cattle on feed inventory to be down 1.1 per cent from a year ago, according to the latest Daily Livestock Report published by Steiner Consulting Group.
There is always a fairly large range of opinions about this survey and the second chart graphically illustrates how those opinions are distributed.
As always analysts tend to be far apart in their assessment of feedlot placements for the past month. All analysts polled by Urner Barry indicate that they expect placements to be lower, and in some cases quite a bit lower than last year.
A number of factors are seen as contributing to the year over year decline in feeder placements in October. Feedlot demand was seen as weak with many feedlots deep in the red and also finding it difficult to properly hedge themselves going forward.
This may have especially been the case in the first two weeks of October, with Feb and April fed cattle contracts breaking under $100 while corn prices were trending higher. Feeder cattle values are seen as a residual of fed and corn prices and therefore auction bids on feeder cattle were quite poor.
Analysts think this caused some cow‐calf operators to hold on to their calves and try to add more weight to them outside of feedlots. Obviously you need to have the feed supplies and weather conditions to do that, especially in some parts of the country. Weather this fall has been quite conducive to doing just that and this likely informed some of the projections for much lower placements.
It is important to recognise, however, that even as placements may track under last year, this does not mean that cattle numbers magically declined. The feeding business is ultimately a flow issue.
Producers may opt to hold on to cattle and wait for a better bid but eventually those cattle will have to come to market. The argument for modestly larger placements hinges on that point. So far holding on to feeders and waiting for a better price has not really worked out. Also cow-calf producers appear more willing to sell heifers and this has also bolstered the number of calves that are theoretically available for placement.
Then there is the issue of year on year comparisons. September placements were just 1.4 per cent higher than the previous month while in 2015 September placements increased month/month 16.8 per cent in September and then another 17.6 per cent in October.
It will be interesting to see how placements this year play out. If analysts are right and placements in October are lighter than normal, we could see a notable supply of feeder cattle build up and available for placements over the winter months, which ultimately means heavier calves and continued big steer weights into next summer.
Futures already have responded to these signals, building huge spreads between Apr and June/August contracts. The rate of placements in the next 45 days will impact how those spreads move around.
Analysts expect marketings in October to be 4.4 per cent higher than a year ago. This may appear low given how large slaughter has been in the last few weeks but this is due to October having one less marketing day. If we adjust for that, then marketing’s would be 6.1 per cent. Steer and heifer daily slaughter in October was 5.2 per cent higher than a year ago.
For now, the total on feed supplies suggest a more current market. But as we have noted in the past, what is hard to discern from the monthly on feed report is the supply of fed cattle currently available in smaller feedlots and which traditionally market more cattle in the fall. Lower marketings relative to slaughter would indicate how much this is a factor today.
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