Cattle Report May Be Viewed Bearishly

Market analysts said the USDA’s Cattle Inventory report Tuesday may be perceived bearishly by live cattle futures traders, especially when taken in conjunction with the USDA’s Cattle on Feed report and the cold storage report.

All three reports showed greater inventories that must be worked through, they said.  And if foreign trade declines, it will only leave more cattle and beef for the domestic market to chew through.

All cattle and calves in the US as of Jan. 1 totaled 93.585 million head, 1.667 million, or 1.81%, more than the 91.918 million head on hand a year earlier, according to the USDA’s National Agricultural Statistics Service’s semi-annual Cattle Inventory report, released Tuesday.

The total was about 600,000 head, or 0.65%, more than the average of analysts’ estimates by Reuters, which came in at 93.0 million.

While there is some evidence that herd growth began to slow late last year, the annual numbers are up, and some analysts project herd growth to continue for the next couple of years.

However, herd growth could be slower as herds begin to have more older cows to cull again.  There also is talk that cow/calf producers are becoming more selective in the quality of the heifers they buy or retain.

The Livestock Marketing Information Center took the total and extrapolated two scenarios for herd sizes into the future.  In one, total inventories could continue rising into 2021 at least, topping out that year at 98.007 million.

In the other scenario, total US inventories flatten in 2017 and 2018 at 92.908 million head and then begin declining.  In this picture, 2021 inventories will be down to 90.695 million.  For reference, US inventories bottomed in 2014 at 88.526 million.

 

FEEDER CATTLE WAITING

 

All cows and heifers that have calved, at 40.559 million head, were 1.083 million, or 2.74%, above a year ago’s 39.476 million.

The number of beef cows that had calved was up 1.044 million, or 3.46%, from a year ago to 31.210 million from 30.166 million.  The number of dairy cows that had calved was up 39,000, or 0.42%, at 9.349 million from 9.310 million.

Last year’s calf crop was listed at 35.083 million head, up 996,000, or 2.92%, from 34.087 million in 2015.  Calves born in the first half of the year totaled 25.550 million head, or 72.8% of the total, compared with 24.650 million and 72.3% a year earlier.  Those born in the second half totaled 9.533 million, or 27.2% of the total, compared with 9.437 million and 27.7% in 2015.

The number of feeder cattle outside feedlots calculated to a range of 26.0 million to 27.0 million head, up nearly 1 million from last year.  These calves will hit the feed yards sometime this year.

As those calves continue to swell the ranks of feeder cattle auctions, which began to fall away from the 2011-2015 average in March last year.

 

CASH CATTLE TRADE QUIET

 

Average fed cattle exchange auction prices last Wednesday were $1.45 per cwt higher at $121.97, versus $120.52 a week earlier.

Cash cattle then traded at $121.50 to $124, mostly $122, on a live basis, up $0.50 to $1.  Dressed-basis trades were reported at a steady $193 to $194 per cwt.

The USDA’s choice cutout Tuesday was down $0.48 per cwt at $192.87, while select was unchanged at $188.93.  The choice/select spread narrowed to $3.94 from $4.42 with 73 loads of fabricated product sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Monday was $130.29 per cwt, down $0.91.  This compares with Tuesday’s Mar settlement of $122.77, down $1.12.