Cattle on Feed Report Slightly Bearish
Today's Cattle on Feed report showed inventory at 11.7 million head, which was 3% above a year ago. This number fell slightly above trade expectations.
Pro Farmer's Brian Grete says the combination of lighter-than-expected marketings and greater-than- expected placements in February pushed the March 1 On Feed tally slightly higher than anticipated. "With all three categories coming in on the negative side of the average pre-report trade guesses, the report gets a slightly negative read. If not for heavy price pressure ahead of the report, the data would be more negative, in our opinion."
A weight breakdown of placements last month shows a major movement of heavyweight animals into feedlots — up 24.4% from February 2011. The number of lightweight calves entering feedlots was steady with year-ago, while 6-weight placements were down 8.2% and 7-weight placements were down 4.7%. States where heavyweight placements were up from year-ago included: Colorado (5,000 head); Nebraska (15,000 head); Texas (5,000 head); and "Other States" (22,000 head). Kansas placed 10,000 fewer heavyweight calves on feed than in February 2011.
Because of the sharp price pressure on cattle futures ahead of this report, the negative price reaction should be limited — and traders may even try to "fade" the data, says Grete. "But traders will want to see proof of a short-term low in the boxed beef market before they begin to actively move money into the long side of the market again."