I disagree with the experts that are saying the cold storage and cattle on feed reports are neutral or slightly bearish. I believe they are bullish. This is why:
1. The main reason is that "supply is and will be limited for a long time". The # of cattle on feed is 6.2% less than a year ago. The fact that new placements for Jan-2013 were greater than for Jan-2012 is still a consequence of the drought and other factors causing high feed & forage prices and poor pastures' condition, which are "forcing" producers to sell. These forced sales mean that placements for the incoming months are going to be reduced, probably increasing the deficit in # of cattle on feed with respect to last year by more than 6.2%.
To make things even more difficult for the supply side, the number of cows slaughtered, which on the week ending on Feb-9-13 was greater that 50% of the total slaughter, is likely to decrease significantly as soon as pasture conditions improve, which is only a matter of time, as the recent storms have provided plenty of water and temperatures will soon be favorable for forage growth. With the reduction in cow slaughter, the stock of cattle on feed will be greatly pressured and depleted at higher rate. The result I expect is that in the period from Jul to Sep (when the lowest # of cattle on feed occurs annually) the # number of cattle on feed will be below 10 million heads, which has not happened in many years.
Another factor to consider is the strong foreign demand for beef, which is stimulating exports.
The problem I see with the current expert opinions is that their vision is very narrow. They are looking only at a very short period, but not attempting to predict the conditions a few months ahead. The people that must make decisions for cattle acquisition know this well, and should act now, or more processing plants may join the status of the Cargill Plant in Plainview.
As per the cold storage report, the amount of beef in freezers is not slightly down with respect to last year, but also the average amount of beef in freezers during the last 5 years has been significantly lower than during the period 2000-2007, while there is more people to feed.