Sept. Cattle Placements Higher than Expected


by John Harrington, DTN Livestock Analyst

The October 1 Cattle on feed report proved to be a bit disappointing with the September placement total overwhelming the early fall marketing even more than expected. With 656,000 more head coming in than going out, the October 1 bunk line increased to 11.312 million, 5{fe867fa2be02a5a45e8bbb747b653fe2e9d0331fd056b85cd0c1a3542435a96e} more than 2010, 7{fe867fa2be02a5a45e8bbb747b653fe2e9d0331fd056b85cd0c1a3542435a96e} greater than the 3-year average, and the largest feedlot population for that date since 2006.

Many traders assumed that the surprisingly small August placement represented the start of an extended pattern, one tied to declining feeder cattle supplies and the unusually large midsummer feedlot in-take forced by the historical severe drought across much of the Southern Plains. But Friday’s report confirming the largest September placement since 2003 suggests that feedlot totals may remain elevated longer than many bulls were betting on.

Yet if there was a silver lining in the larger-than-expected placement total, it probably involved the weight breakdown. All of the increase was tied to cattle weighing under 600 pounds.

Here’s how placement weights broke down last month: 800 pounds and up, 865,000 head, off 3{fe867fa2be02a5a45e8bbb747b653fe2e9d0331fd056b85cd0c1a3542435a96e}; 700-799 pounds, 504,000 head, off 16{fe867fa2be02a5a45e8bbb747b653fe2e9d0331fd056b85cd0c1a3542435a96e}; 600-699#, 415,000 head, off 9{fe867fa2be02a5a45e8bbb747b653fe2e9d0331fd056b85cd0c1a3542435a96e}; under 600 pounds, 685,000 head, up 34{fe867fa2be02a5a45e8bbb747b653fe2e9d0331fd056b85cd0c1a3542435a96e}.

It’s a good bet that the surge in light-weight placement was caused by persistent dry conditions in the South and dismal prospects for winter grazing on wheat pasture. Indeed, Kansas and Texas (i.e., ground zero of wheat pasture potential) feedlots placed 60{fe867fa2be02a5a45e8bbb747b653fe2e9d0331fd056b85cd0c1a3542435a96e} and 47{fe867fa2be02a5a45e8bbb747b653fe2e9d0331fd056b85cd0c1a3542435a96e} more light-weight calves, respectively.

So while the total placement number looks somewhat negative, the calf-dominated mix may be more positive for several reasons. First, it implies more of a shotgun blast in terms of fed marketing down the road with more ready cattle scattered over a wider range in the calendar. Second, the old adage of “lighter in, lighter out” bodes well for smaller beef tonnage next year.

According to the DTN placement model, big lots now have 2.207 million steers and heifers scheduled to finish in January, 1{fe867fa2be02a5a45e8bbb747b653fe2e9d0331fd056b85cd0c1a3542435a96e} more than 2011 but 6{fe867fa2be02a5a45e8bbb747b653fe2e9d0331fd056b85cd0c1a3542435a96e} above the 4-year average.

Deferred live cattle futures are likely to open 50-150 points lower on Monday as bulls initially pull in their horns given the larger-than-expected placement. Such a pullback seems more probable given the fact that early 2012 contracts closed on Friday $4-$8 above the spot cash market.

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Posted with DTN Permission by Haylie Shipp


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