Cattle on Feed Report Bearish

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Following are report highlights: All categories in USDA's monthly audit of feedlot activity came in on the bearish side of the average pre-report trade guesses. The most bearish number was Placements. While traders expected Placements to be up sharply, the average trade guess was still 2.3 percentage points above USDA estimate. While the year-on-year comparison for Placements may be skewed a little by last year's slow movement into feedlots during December, the Dec. 2010 Placements figure is still 6.4% above the three-year average.

Looking at the weight breakdown of calves that entered feedlots last month, feedlot managers found more of the cattle they were looking for. Heavyweight calf placements (800 lbs.-plus) surged 28.8% from year earlier; 7-weight placements were up 9.7%; 6-weight placements were up 17.9%; and lightweight (under 600 lbs.) were up 11.6%.

That movement of calves into feedlots should erase concerns over a supply "hole" for the first quarter. The report data is most bearish for deferred live cattle futures. If the report reaction is strong enough Monday, it could put a major top in these contracts. .

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