On-feed inventories March 1 marked the 19th consecutive month of lower year-to-year numbers. “At some point, the lack of feeder cattle available to place will curtail placements. That will point to sharply lower fed cattle supplies six to eight months later,” explains John Otte, Penton market analyst.
Feedlot placements of 1.65 million head reported in Friday’s monthly Cattle on Feed report are 15% higher than the previous year. That’s on the upper end of what analysts were expecting.
According to the Dow Jones survey ahead of the report, Penton market analyst John Otte explained Friday morning that analysts expected an average of 9% more cattle placed in February. The range was 102% to 118.2%.
“Recent husky feedlot closeout profits are luring feedlot operators to place cattle,” Otte explained earlier in the week. “At some point lack of feeder cattle available to place will curtail placements. That will point to sharply lower fed cattle supplies six to eight months later.”
On Thursday, Steve Meyer and Len Steiner said in the Daily Livestock Report that Umer Barry’s pre-report survey had analysts estimating February placements of more than 9%, with one estimate as high as 18% more.
“The feedlot placement picture represents the classic economic tension between current costs and anticipated value,” Steiner and Meyer say. “On the one hand is record-low supplies of feeder cattle and on the other is record-high futures values — which may or may not pan out to be record-high actual values.
“Higher February placements might be interpreted as pointing to a rise in beef supply later,” Otte explained. However, he also points out the on-feed inventory marks the 19th straight month the inventory was lower than the same month a year earlier.
According to Friday’s COF report, the inventory of cattle on feed (10.8 million head) is 1% less than a year earlier.
February marketings (1.55 million head) represented a 3% decrease from the prior year, which was dead square with what analysts expected prior to the report.
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