7/28/2010 2:15:00 PM Cattle on Feed Report: Lack luster reports
By Kelly Bruns
Like last month, analysts' predictions were on target which should result in nothing more than normal trade on Monday. One could say that the high placement total would be reason for concern but the higher number is due to the fact that placements in 2009 were historically low. Placements for May and June 2010 were only 4.2% ad 4.7% lower than the 5-year average.
This is the second month in a row that inventories have been higher. One has to wonder if there are ample supplies to post a higher on feed total next month. Yards with cattle to market in September through the end of the year need to pay close attention to what transpires with boxed beef sales the next couple of weeks. Last week's rise in packer bids is promising.
Even though supplies are currently tight, the DTN placement model reports that there are 17% more cattle to market in October than last year. Producers must pay close attention as hedging opportunities may exist if the cash trade can gain strength and push the August board higher spilling over to October and December, which are already higher.
Demand has been good mainly due to an export market that is 25% higher than last year and is currently at 87% of 2003 the year exports peaked prior to BSE. Additionally, imports down 10% so far this year even though our dollar has gained some value. Tight beef supplies globally are the biggest factor contributing to the smaller import number.
Analysts do not agree if the market has set it's lows for the summer and are mixed if we can maintain this rally, or if we will see a correction in August before improving toward Labor Day. The futures do look a bit oversold and may have to correct themselves. This should not last long as supplies are tight.
Tighter supplies were the main topic of the July 1st Cattle Inventory Report. The beef cow herd is now at its lowest point since 1963 at 31.7 million head. One would think that improved margins and an abundance of grass this summer would result in greater heifer retention but that has not been the case.
Kelly Bruns is a professor of Animal Science at South Dakota State University.
