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CME: Participants Actively Preparing for COF Report

25 May 2017

US - The next "Cattle on Feed" report will be released during trading hours on Friday, which is a bit unusual and something that market participants likely are actively preparing for, reports Steiner Consulting Group, DLR Division, Inc.

The report will be issued at noon ET (Friday, 26 May) rather than the regular 3PM release.

The table below shows what the 10 analysts polled by Urner Barry expect the report to show. As you can see, the opinions vary greatly, both in terms of cattle placements during April as well as the number of cattle that were marketed for the month.

On average analysts polled expect placements to be up 7.2 per cent compared to a year ago. This would imply an increase of 120,000 head compared to year ago levels following an increase of around 400,000 head (vs. 2016) in the first three months of the year.

Given robust demand and positive returns, feedlots are expected to have placed more cattle on feed but one needs to look at the pace of placements in the context of the available feeder supply. At the start of the year the calculated supply outside of feedlots was 563,000 head (+2.2 per cent) larger than the previous year.

April sales in the were strong, with overall feeder and stocker cattle receipts in the four April weeks up 9.4 per cent compared to the previous year. Auction receipts were up only 2 per cent but there was a big increase in both direct sales and video/internet sales.

The percentage of +600lb cattle that changed hands in April also was higher than a year ago. Higher sales do not always mean larger placements, especially when grass supplies are so abundant.

Placements are expected to increased despite a net reduction in imports from Mexico and Canada. During the period 2 April - 29 April, imports of Mexican feeder cattle were 17,868 head (-16 per cent) compared to the same period a year ago.

Imports of Canadian feeder cattle during that period were 13,845 head (-38 per cent) lower than last year. This reduction needs to be considered when accounting for the level of placements last month.

Analysts on average expect marketings in April to be up 1.7 per cent compared to a year ago. Most analysts polled indicated they expect marketings to be up 1.5 per cent to 2.0 per cent compared to a year ago, which is less than the pace of slaughter during the month.

However, there was one less marketing day in April and that affected the year/year comparison. Daily steer and heifer slaughter in April (per USDA) was 1.941 million head, 1.9 per cent higher than last year.

The combination of lower marketings and higher placements likely contributed to a net increase in the total number of cattle on feed as of 1 May. On average analysts expect total inventories to be up 0.9 per cent from a year ago.

However, the front end supply still is expected to be quite a bit lower than last year. Using the average of analyst estimtes, the +120day cattle supply is down 12 per cent from a year ago and the +150day supply is 35 per cent lower than last year.

Larger placements should increase availability later in the summer but the pace of marketings in June and July remains a critical variable and participants will watch closely on a daily/weekly basis.

Daily Livestock Report - Copyright © 2008 CME. All rights reserved.

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