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Market Analysis

What you see here is a sample of our market report from the Daily Livestock Report we write for the Chicago Mercantile Exchange.

DLR 092010 Cattle on Feed graphicCattle on Feed Report: The results of the cattle on feed report issued by USDA on Friday, September 17 were very different from the pre-report estimates and will likely be viewed as bearish by futures markets when they open on Monday. On average the analysts interviewed by Dow Jones last week indicated that they expected cattle placements in August to decline 0.6%. Only two of the dozen or so analysts surveyed predicted that placements in August were actually higher and just one of them was close to the number published by USDA. The total number of cattle placed on feed last month actually rose 7.4% compared to the previous year and this caused the overall inventory number to be much higher than earlier thought. The average of estimates was looking for feedlot inventories as of September 1 to be below 10 million head, 1.1% higher than a year ago. The final number was about 200,000 head higher than the pre-report estimates and at 10.173 million head it was 3% larger than a year ago.

The implication of the latest report is that cattle supplies this coming winter will not be as tight as earlier feared. It may seem odd that with all the talk of higher feed costs, feedlots would accelerate their placements in August. But as we pointed out on Thursday, much of the increase in feed prices took place in September and therefore had limited impact on the feeder trade last month. Given the pace of placements last month and the surge in corn futures so far, it would not surprise us to see a sharp pullback in placements in September. While the recent feedlot survey was on the bearish side, the surge in grain prices remains long term bullish for beef prices. Corn futures have been on an impressive climb in recent days as market participants strive to understand the potential impact of lower yields and the effect of supply shortages in other parts of the world. As a result, the negativity in the latest USDA release will be tempered by the bullish momentum in other markets.

Weekly Production/Price Highlights: Hog slaughter and production continues to trend well below year ago levels. USDA will release on Friday, September 24 the results of the quarterly survey of hogs and pigs operations and chances are good that some of the previous inventory numbers will be revised lower. Total production for the week was reported to be 431 million pounds, almost 8% lower than a year ago. The number is preliminary and it reflects in part lower hog carcass weights. The actual weight data will be published in two weeks and it will be interesting to see if weights are really as much as the estimates suggest. At the moment, the shortfall in weights has further compounded the impact of smaller hog slaughter levels.

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