Cattle and beef markets likely will consider the Cattle-On-Feed report as only slightly bearish to neutral, but there still is reason to worry about meat supplies.
The major meats of beef and pork in cold storage showed declines from April, but this is normal. Total red meats on ice also showed a seasonal tendency to slip inventory levels. Red meat stocks also were down from a year ago, which is good for prices as long as demand remains constant.
The issue is with poultry. Total poultry supplies, at 1.267 billion pounds, were 53 million pounds, or 4.37%, above last month’s 1.214 billion. They also were up 1.079 billion, or 6.65%, from 1.188 billion last year and up 113 million, or 9.79%, above the 2010-2014 average of 1.154 billion.
To be fair, much of the increase in poultry stocks is a normal upwelling of turkey stocks, but chicken inventories are holding steady. Last year, they declined in May, while the previous five-year average has an increase.
Chicken supplies, at 803.226 million pounds, were down 1.728 million, or 0.21%, from 804.954 million a month earlier.
The issue is 2016 chicken stocks are above last year and the average.
Beef stocks, at 446.71 million pounds as of May 31, were down 6.38 million, or 1.41%, from 453.10 the previous month.
Pork inventories totaled 612.715 million pounds, down 24.605 million, or 3.86%, from 637.32 in April.
On-feed inventory as of June 1 was 2.2% above last year, with May placements up 9.6%, in line with or close to trade expectations, and any bearishness may have been absorbed by Friday’s lower trade.
Normal placement rates go down in June as marketings go up, resulting in lower feedlot inventories into August or September. Total cattle on feed begin rising again as pastures go dormant in the fall.
Feedlot managers have been working down their cattle inventories as forward futures prices declined, and they may continue that trend for the next few months. Total numbers of cattle on feed longer than 90 or 120 days are declining, and the tendency of cow/calf operators to keep calves on grass longer and sell at heavier weights means more cattle will reach a respectable market weight sooner, allowing a faster turn-around in coming months.
PROBLEMS WITH HOGS
However, the Quarterly Hogs and Pigs report was more bearish than many expected, showing total inventory as of June 1 at 68.381 million head, the highest for the period since records began in 1964.
The hog count was up 1% from last month and up 2% from last year, while the breeding inventory was up 1% from last year. Sows farrowing in the March-May period also were up 1% from a year ago.
CASH CATTLE MARKET $4 TO $5 LOWER
Cash cattle markets last week were $5 per cwt lower than the previous week at mostly $116 on a live basis and at $184 to $186 on a dressed basis, down $12 to $13.
The USDA’s choice cutout Friday was $1.60 per cwt lower at $213.86, while select was off $0.51 at $197.83. The choice/select spread narrowed to $16.03 from $17.12 with 100 loads of fabricated product sold into the spot market.
The CME Feeder Cattle Index for the seven days ended Thursday was $141.27 per cwt, up $0.41. This compares with the Aug settlement Friday of $139.45, down $2.92.