25 February 2010

4 minute read

North America

This past Friday’s Cattle on Feed (COF) report again did not contain many major surprises, but it continued to expose indications of declining production and thus a positive supply situation. Although within the range of pre-report estimates the number of cattle placed on feed during January was on the high side of expectations. This was offset somewhat by a larger than expected number of marketings throughout the month. The healthy pace of marketings, along with lower dressed weights, should alleviate the market’s fear of large front end supplies over the next 30 to 60 days. Cattle on feed February 1 totaled just under 11 million head, 2.6 per cent lower than 2009 and 3.6 per cent lower than the 2003 to 2007 average. The table below summarises the COF report and pre-report estimates:

Within this month’s COF report were estimates regarding the number of US feedlots, inventory and annual marketings. The number of feedlots remained the same at 82,170. The majority of the feedlots fell into the 1,000 head capacity or less category – which was unchanged at 80,000. Total inventory for 2009 dropped by 1.5 per cent, from 13.86 to 13.64 million head – this includes feedlots with less than 1,000 head capacity, despite an estimated increase in total capacity, from 16.7 to 16.8 million head. Feedlots with less than 1,000 head capacity increased their inventory by 12,500 head and feedlots with 1,000 head capacity or greater decreased their inventory by 226,000 head.

The Markets

The five-area fed cattle price was at $91 for the week (about $2.50 above the previous week). Boxed beef prices continued their move higher throughout the week with Choice prices closing out Friday just under $145 and a weekly average of $144.58, $5.26 over last week’s average. Oklahoma City feeder and stocker prices were up this week: feeder steers and heifers were called firm to $2 higher while stockers and calves were $4 to $10 higher.

Both live and feeder cattle futures moved sharply higher through the week taking direction from improvements in the overall economy and boxed beef prices. The Dow Jones Industrial Average moved higher by more than 300 points during the holiday shortened week. The improvements in wholesale beef prices added further support. Corn also started the week sharply higher as well, following stocks and oil all despite a strengthening US dollar. The sentiment was short lived though as corn moved lower through Thursday. The nearby March contract closed at $3.60 and the December contract was at $3.98 ¼.