CME: Highlights of Monthly Cattle on Feed Report

That group expected placements to be 12.3 per cent lower than last year and the actual number came in at 1.638 million head, down 13.8 per cent (see Figure 1). That is the lowest level for May feedlot placements since 1996. Even with slightly higher placements in recent months (just over 4 per cent higher than in 2008 for both March and April), this probably signals some "giving in" to market conditions on the part of cattle feeders. Continued disappointments in the fed cattle market and continuing higher feed costs had to eventually impact decisions. That time certainly appears to have arrived.

Both fed cattle marketings and the number on feed on June 1 (see Figure 2) were quite close to pre-report estimates. Average placement weights (Figure 3) were sharply lower than last year but readers should be cautious of that comparison as last year’s May placements were quite heavy, resulting from delayed placements during the early run-up of feed prices. Lower placements, 45 per cent lower imports of Canadian feeder cattle year-to-date and, now, lower placement weights all suggest that USDA’s estimates for the 2008 calf crop and supplies of calves and feeder cattle outside of feedlots have been too high. If not, there are some serious numbers of cattle in storage somewhere. Good grass conditions would make that possible but we don’t think it is true and would look for some revisions in past calf crops and light-weight cattle inventories in the July Cattle (usually called the Cattle Inventory) report.

The pork industry’s Producer Retirement Program (PRP) was officially cancelled last week. Recall that this was a sow herd buyout program patterned after the dairy industry’s Cooperatives Working Together program that has paid producers to retire dairy cows on six occasions. The pork program’s organizers cited the deterioration in hog markets in May and June as leaving producers unable to pay the $20/sow membership fee that was hoped to generated $50 million to, in turn, offer to producers on a lowest bid basis to retire sows for two years. US sow slaughter amounted to only 61 million head (-12.9 per cent from 2008) the week of 6 June but we have had reports of much larger sow offerings the past two weeks and USDA’s quoted prices for all weights of sows have declined by about 30 per cent. It appears liquidation is underway without the program. Part of the rationale for the PRP was to add some order to the reduction to keep the decline from overshooting the mark and leaving the sow herd below its optimal level.

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