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CME: Market to Focus on Number of Cattle Placed

16 October 2009

US - USDA will publish today, 16 October, the results of its monthly survey of feedlots with 1000 head or more cattle on feed as of 1 October.

The report is expected to show that feedlot supplies at the start of this month were effectively at the same level they were a year ago and, based on the Dow Jones survey of a number of analysts, the range of pre-report estimates is about 1 per cent above or below year ago levels. The increase in feedlot numbers is not a surprise, it happens every year as more calves become available. Also, the relatively low feedlot inventories in Q4 of 2008 means that the year over year change will be a lot smaller than it was earlier this year.

As usual, the market will focus on the number of cattle placed in September as well as the type of cattle placed. There is a considerable range in placement estimates for September, although all analysts polled indicated that they think placements will increase from last year. The average of pre-report estimates indicates placements will be up 125,000 head or 5.5 per cent compared to a year ago and be 76,000 head or 3.2 per cent higher compared to the five year average.

Feeder prices drifted lower into September following much lower prices for out front live cattle and rising grain prices. With beef markets in turmoil, there was increased pressure on cow calf operators to start moving animals into feedlots, increasing overall availability. There is also an expectation that not only will there be more cattle placed on feed but also the cattle placed on feed will be heavier and thus requite fewer days on feed to reach market weights. In the August report, the USDA survey showed that the number of feeders weighing 800 pounds or more was up 8 per cent from the previous year.

Heavy feeders accounted for about 37 per cent of the overall placements in August, during the same month a year ago they accounted for 35 per cent of placements. The number of cattle marketed in September is expected to be down as much as 2.2 per cent compared to year ago levels although there was a notable range in estimates. A simple comparison of the daily fed slaughter data for September shows they were down about 3.4 per cent compared to last year. However, when one adjusts for transit time, we could actually see marketings very close to year ago levels.

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