Producers, traders, and analysts will harvest a bumper crop of cattle numbers Friday afternoon when the USDA shells out both its monthly feedlot report and the midyear cattle herd inventory. As usual, the former should command more attention than the latter, especially given its greater potential impact on short-term beef supplies and price direction.
Most are expecting USDA to confirm another round of aggressive feedlot placement. While cattle feeders pulled 23 percent more animals into yards in May, pre-report guesses are betting that placement activity was bumped another 20 percent in June. Such a large second quarter increase seems to be tied to at least two factors: 1) The historically light placement of the Nov-Feb period (i.e., the smallest since the data series began in 1996) left a lot of yearlings “out there” to be used; and 2) The second quarter placement (i.e., 4.63 million) was the smallest since Apr-June 1996.
Assuming the June placement comes in as expected, second quarter in-movement will total 5.15 million head, 11 percent more than 2009 but only 3 percent greater than the 3-year average.
In short, the feedlot table may be set for a significant increase in beef product later this summer/early fall vis-a-vis 2009, yet tonnage should remain historically manageable. This may be one reason why August live futures remain well below spot cash.
The July 1 cattle count is widely known as a reliable tonic for insomnia. It should be a real yawner. In fact, it tends to be one of those hapless reports ignored even before the ink dries: if it fits well with expectations, we’ll called old and boring news; if it proves to be too shocking, we’ll dismiss it as statistically unreliable.
The herd inventory should continue to document ongoing liquidation. Cow numbers have been steadily dropping since 2006 with beef cows off about 1.6 million head over 4 years. Cow slaughter averaged about 14 percent higher in the first half of the year, and with only modest signs of heifer retention there’s virtually no reason to suspect that herd size in close to a bottom.
While they lack real market-moving potential, the inventory will contain at least two fairly important readings: 1) The first estimate of the 2010 calf crop; and 2) The implied size of the feeder cattle pool outside of feedlots on July 1. Some are suggesting the calf crop could be surprisingly small given harsh winter conditions in many areas of ranch country. Even if the calf crop turns out to be well anticipated (i.e., around 38.4 million head), it will contribute toward a 5 to 6-percent cut in the July 1 feeder cattle supply available for second half placement.
(CZ)
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Posted with DTN Permission by Haylie Shipp
