Bullish On-Feed Report Jumpstarts New Week


by John Harrington, DTN Livestock Analyst

Cattle on Feed – Friday, September 23, 2011

On Feed Sept 1

  • USDA Actual  105{e7e4ba4d9a3c939171d79cae1e3a0df1d41e5a91c3c4158fbb92284b490bc9d3}
  • Average Guess  108{e7e4ba4d9a3c939171d79cae1e3a0df1d41e5a91c3c4158fbb92284b490bc9d3}
  • Guess Range  106{e7e4ba4d9a3c939171d79cae1e3a0df1d41e5a91c3c4158fbb92284b490bc9d3} – 109{e7e4ba4d9a3c939171d79cae1e3a0df1d41e5a91c3c4158fbb92284b490bc9d3}

Placements in August

  • USDA Actual  99{e7e4ba4d9a3c939171d79cae1e3a0df1d41e5a91c3c4158fbb92284b490bc9d3}
  • Average Guess  107.5{e7e4ba4d9a3c939171d79cae1e3a0df1d41e5a91c3c4158fbb92284b490bc9d3}
  • Guess Range  106.5{e7e4ba4d9a3c939171d79cae1e3a0df1d41e5a91c3c4158fbb92284b490bc9d3} – 126.5{e7e4ba4d9a3c939171d79cae1e3a0df1d41e5a91c3c4158fbb92284b490bc9d3}

Marketings in August

  • USDA Actual  107{e7e4ba4d9a3c939171d79cae1e3a0df1d41e5a91c3c4158fbb92284b490bc9d3}
  • Average Guess  105.5{e7e4ba4d9a3c939171d79cae1e3a0df1d41e5a91c3c4158fbb92284b490bc9d3}
  • Guess Range  104{e7e4ba4d9a3c939171d79cae1e3a0df1d41e5a91c3c4158fbb92284b490bc9d3} – 108{e7e4ba4d9a3c939171d79cae1e3a0df1d41e5a91c3c4158fbb92284b490bc9d3}

It’s been quite a while since a monthly Cattle on Feed report has qualified as a “shocker.” But given the way the August placement total looks, somebody at USDA is making up for lost time. Feedlot in-movement last month turned out to be nearly 200,000 head smaller than the average trade guess implied.

The September 1 Cattle on Feed report released this afternoon turned out to be very bullish thanks to both smaller-than-expected August placement activity and larger-than-expected August marketings. Of course, such bullish twists also meant that total on feed numbers came in way short of expectations.

But it was the 1{e7e4ba4d9a3c939171d79cae1e3a0df1d41e5a91c3c4158fbb92284b490bc9d3} drop in placements that really caused market-watching eyes to pop. Nearly everyone expected a repeat of the July experience when severe drought conditions across the Southern Plains forced a large number of would-be stockers into feedlots.

While some of that clearly happened, the late summer wave was not as large as many feared. The state breakdown indicates that while drought-stressed Texas placed 15{e7e4ba4d9a3c939171d79cae1e3a0df1d41e5a91c3c4158fbb92284b490bc9d3} more cattle than last year, both Oklahoma (off 7{e7e4ba4d9a3c939171d79cae1e3a0df1d41e5a91c3c4158fbb92284b490bc9d3}) and Kansas (off 15{e7e4ba4d9a3c939171d79cae1e3a0df1d41e5a91c3c4158fbb92284b490bc9d3}) placed fewer.

The bigger deal-changer in this regard may have been actually tied to Northern feedlot managers and ranchers. Perhaps spooked by the possibility of large late-year fed numbers and blessed with the buffer of tall, late season grass, area producers may have strategically delayed placement plans.

August placement fell significantly in Nebraska (off 7{e7e4ba4d9a3c939171d79cae1e3a0df1d41e5a91c3c4158fbb92284b490bc9d3}) and Iowa (off 10{e7e4ba4d9a3c939171d79cae1e3a0df1d41e5a91c3c4158fbb92284b490bc9d3}).

The placement data really seems doubly bullish. On one hand the total is much smaller than most anticipated. On the other hand, most of the shortfall involved yearling type cattle — steers and heifers weighing over 700 pounds.

Just consider the placement weight breakdown: under 600 pounds, up 44{e7e4ba4d9a3c939171d79cae1e3a0df1d41e5a91c3c4158fbb92284b490bc9d3}; 600-699 pounds, off 6{e7e4ba4d9a3c939171d79cae1e3a0df1d41e5a91c3c4158fbb92284b490bc9d3}; 700-799 pounds, off 16{e7e4ba4d9a3c939171d79cae1e3a0df1d41e5a91c3c4158fbb92284b490bc9d3}; 800 pounds and over, off 15{e7e4ba4d9a3c939171d79cae1e3a0df1d41e5a91c3c4158fbb92284b490bc9d3}. The significant lack of 8-weights in the placement mix (i.e., the smallest total since 2007) means that late-year fed numbers should be considerably more manageable than once thought.

For example, the DTN placement model now projects that big lots have 1.98 million head to finish in December, 2{e7e4ba4d9a3c939171d79cae1e3a0df1d41e5a91c3c4158fbb92284b490bc9d3} below 2010 (though still 4{e7e4ba4d9a3c939171d79cae1e3a0df1d41e5a91c3c4158fbb92284b490bc9d3} above the 4-year average). More generally, the smaller-than-expected number of 700-pound-plus cattle plus should reduced the trade’s fear of large Dec-Feb fed tonnage ahead.

We expect Dec-Feb live cattle futures to quickly reflect this friendly reality when trade resumes on Monday. Indeed, don’t be surprised if these deferred contracts open as much as 100 to 200 points higher.


© Copyright 2011 DTN/The Progressive Farmer, A Telvent Brand. All rights reserved.

Posted with DTN Permission by Haylie Shipp


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