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CME: 1 June Supply of Cattle on Feed Expected to be Up

20 June 2019

US - USDA-NASS will issue on Friday, 21 June, the results of its monthly survey of feedlot operations with a capacity of +1000 head, reports Steiner Consulting Group, DLR Division, Inc.

The following table offers a summary of what 11 analysts polled by Urner Barry expect to see in the upcoming survey. On average analysts expect the total supply of cattle on feed as of 1 June to be up 1.3 percent compared to a year ago.

Below is a brief recap of factors driving this forecast:

Placements: This month analysts appear to be in better agreement than in the past and all those surveyed think May placements were lower than the previous year. Feeder placements normally are higher in May as cattle from various backgrounding operations flow into feedlots. Feeder cattle placements that go on feed also tend to be heavier during this time of year.

In the last ten years, placements of +800 lb. cattle in March, April and May have accounted for about 35 percent of total placements. The share of heavier feeders declines later in the year and in Q4 +800lb. cattle have made up just 24 percent of all placements (10-yr avg.). It is important to point out that placements in May 2018 were especially large so we are comparing to a relatively high point.

We did see a notably better placement rate during March and April of 2019 hence the expectation for somewhat lower May placements vs. year ago levels. Feeder cattle sales in May were quite light, giving analysts another reason to expect lower placements than the previous year. We offered an update on this in our 12 June report, highlighting the fact that auction receipts were significantly higher during April but were then followed by a sharp decline in May.

For the period 4 May through 31 May (4 weeks), total feeder cattle sales receipts were down 28 percent compared to the previous year. Both auction and direct sale receipts were down sharply while video/internet sales were modestly higher than a year ago. Sales of +600lb. feeder cattle during this period were down 30 percent compared to the same period a year ago.

Corn prices have increased sharply in recent weeks and this was a particular issue in the second half of May. High feed costs tend to depress the price feedlots are willing to pay for feeder cattle, adding more friction to the exchange. Cow-calf operators are looking at much better pasture conditions at this time than a year ago, which when combined with low bids for calves tends to further limit the flow of cattle into feedlots.

The latest USDA Crop Progress report suggested that as of last week 71 percent of pastures and ranges were rated in good or excellent condition, far better than 48 percent rated as such a year ago and well above the long run average. We also did not see much of an increase in imports of feeder cattle from Canada/Mexico. Imports of feeders from Mexico during the four May weeks were up by about 13,000 head while imports from Canada were down about 8,500 head.

Marketings: Almost all analysts polled expect to see a y/y increase in May marketings so the wide range in the survey results above is a red herring. USDA-NASS fed cattle slaughter in May (based on daily numbers) suggests a 0.9 percent increase compared to the previous year.

There was the same number of marketing days in May 2019 vs. year ago, so that should not be an issue. If analysts are correct, the ratio of May marketings vs. the +90-day inventory (marketing rate) was 32.9 percent vs. 32.6 percent last year and 32.2 percent for the 5-yr average.


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


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