COF Report Shows Higher Placements May Be Bearish Trend

February placement of cattle and calves in feedlots were 10% above 2015 at 1.71 million head, signaling pressure on cash and futures even as wholesale beef  prices have  risen in past days on increased packer  demand.

The placements number is above industry estimates.  A Reuters poll of 10 analysts had  placements estimated at 8%  over last year. Cattle placed on feed during January 2016 totaled 1.789 million.

Placements in feedlots during February totaled 1.71 million head, 10% above 2015. Net placements were 1.65 million head. During February, placements of cattle and calves weighing less than 600 pounds were 335,000 head, 600-699 pounds were 300,000 head, 700-799 pounds were 445,000 head, and 800 pounds and greater were 630,000 head.

The report tends to be neutral to slightly bearish because of the 10%, one analyst said, but traders will mull over the various numbers looking for significant details. The analyst said that “any way you cut it up and fry it, it is not positive. Weaker is in the future.”

He also sees the placement trend as “changing to bigger placements, trending from a solidly-entrenched lower placements.”  He said the net result will be “lower values in the cattle world’s future. Honestly, that is exactly what the back of the board is telegraphing to the street.”

The USDA’s National Agricultural Statistics Board (NASS) said in its report that there were  a total of 10.8 million head of cattle and calves on feed in feedlots with Cattle and calves on feed for the slaughter market in the United States  on March 1, 2016.That was for feedlots with capacity of 1,000 or more head. The inventory

Nebraska placed 395,000 cattle on feed, down 1% from the 400,000 in 2015, but below the 400,000 in January 2016. Texas placed 345,000 cattle on feed, up 21% over the 285,000 in 2015. There were 375,000 cattle placed on feed in Kansas, 6% above the 355,000 in February of last year. Colorado placed 170,000, an increase of 20,000, or 13% over the same month of 2015.

Of the 10. 8 million the cattle on feed, Texas had 2.4 million, even with last year;  Nebraska had 2.4 million, down 3% from the  2,500 in February 2016.  Kansas had 2.2 million, up 4% from 2.1 million in February 2016.

Fed cattle to market during February totaled 1.59 million head, 5%  above 2015.  Other disappearance totaled 58,000 head during February, 3% below 2015. Nebraska sent 420,000 cattle to market, up 9% over February 2015. Marketings in Kansas were 345,000, down 3% from the 355,000 a year ago. Texas marketed 315,000 cattle, even with February of last year.

Earlier Friday, cattle markets were nervous ahead of the COF report and about cutout prices. Boxed beef cutout values sharply lower on Choice and weak on Select on light to moderate demand and offerings. Choice cutout values were $231.81, down $2.83. Select was down 0.64 cents at $22.33. The Choice/Select spread narrowed to $9.48 from Thursday. Traders worried that wholesale beef prices might be about to peak recent runs to two-month highs.  One trader said cutouts may have “put too much on too fast, which may have choked off demand at the wholesale level.