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CME: Latest COF Report Shows Aggressive Placements of Calf Crop

28 August 2018

US - The "Cattle on Feed" report released by USDA-NASS last Friday showed aggressive placements of this year’s calf crop into feedlots, reports Steiner Consulting Group, DLR Division, Inc.

Weights of cattle placed under 600lbs. was up 14 per cent nationally and those placed at 600 to 699 lbs. was up 23 per cent above a year ago. States outside the top four, named other states in the report, showed 31 per cent more lightweight cattle that were placed under 700 lbs. in July compared to last year.

Nebraska and Texas showed similar patterns with higher year over year percentages in categories under 700 lbs. Colorado placements showed more diversity with all weight categories (under 600lbs, 600-699, 700- 799, and over 800 lbs.) up 20 per cent.

The total number of placements was up 7.9 per cent compared to a year ago and the highest July placement value since 2012. Placements were on the high side of analyst expectations but still within the range of pre-report estimates.

Cattle marketed in July was up 5 per cent from the previous year, close to analyst consensus ahead of the report. Cattle on feed as of 1 August was 4.6 per cent. A higher other disappearance value tempered higher placements, and eased inventory on a monthly basis down about 200 thousand head from the 1 July Cattle on Feed figure.

Cattle on feed over 90 days continued to work the inventory down, while inventory of cattle on feed over 120 days or more was more or less stagnant compared to the previous month. Higher levels of lightweight placements set up a continuation of high numbers of cattle on feed for over 120 days. Longer days on feed lends to higher weights at slaughter but so far, steer weights have been moderate, while heifer weights have been up all year.

In the recent week of data (8/11/2018), steer dressed weights were down 1 pound compared to a year ago, while heifers were 6 pounds higher. The next quarterly breakdown of heifers and steers on feed and should give some indication if a greater number of heifers are still being placed into feedlots.

The Cattle on Feed report is following the Cold Storage report as detailed in Friday’s DLR, showing hefty increases in beef inventories. Much of the increase is in boneless beef, which hit a record large July in 2018. These stock build-ups could be more indicative of larger ground beef supply from higher cow slaughter levels seen all year rather than inventories building in high-value muscle cuts.

Cold storage does not break out beef inventory into this level of detail, so its unknown the true nature of cold storage inventories. If that is the case, high levels of steer and heifer placements into feedlots less concerning if demand is still able to chew through what has been a continuous flow of high steer and heifer supplies entering slaughter channels.

Further Reading

You can view the Cattle on Feed report by clicking here.

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