All three categories in USDA’s Cattle on Feed Report came in on the negative side of the pre-report guesses. With Placements nearly three percentage points above the average guess and Marketings just over three percentage points less than anticipated, USDA’s Jan. 1 On Feed number came in one percentage point above expectations, but down 5% from year-ago. The “miss” was a modest 72,000 head compared to the average pre-report guess. Still, the Jan. 1 feedlot inventory is 600,000 less than year-ago.
Report details | USDA | Avg. Trade Guess | Range |
% of year-ago levels | |||
On Feed | 95 | 94.0 | 92.5-94.7 |
Placements | 101 | 98.1 | 91.4-102.1 |
Marketings | 99 | 102.2 | 97.7-104.5 |
With Placements up 1% from year-ago despite tight U.S. calf supplies, it implies there are a greater number of Mexican and Canadian calves coming across the border as feedlots look to take advantage of cheaper feed costs and a strong cash cattle market outlook. A weight breakdown of animals moving into feedlots last month shows: lightweight placements down 2%, 6-weights up 1.2%; 7-weights up 3.2%; and heavyweight placements up 2.7% from year-ago.
We’ll know more after next Friday’s Cattle Inventory Report, but the bigger-than-expected placements could also be the result of an expanded dairy herd. If the “extra” calves being placed on feed are mostly black-and-white, we’ll have more dairy beef coming to the market. However, most dairy-beef steers fall into the lightweight category, so it’s really difficult to expect the higher-than-expected placements to be the result of a bigger supply of dairy feeders.
With all three categories on the negative side of the average pre-report guesses, this could lead to additional profit-taking in cattle futures Monday. But the big discount cattle futures hold to the cash market should limit selling unless traders are convinced a top is in place.
