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CME: Onslaught of Cattle Moving into Feedlots During H1 Continued in June

27 July 2017

US - The onslaught of cattle moving into feedlots during the first half of 2017 continued in June, with placements up 16 per cent from the prior June, according to Steiner Consulting Group, DLR Division, Inc.

Year-to-date placements are up close to 1.1 million head, or more than 10 per cent, from the same six months in 2016.

This increase is fueled by one million more calves that were born in 2016 than 2015 and 500,000 more calves in 2015 than 2014.

The increase in placements in recent months is being encouraged by developing price trends between heavier weight feeder cattle prices and calf prices.

Calf prices peaked in late April and have trended gradually lower since then. Heavier weight feeder cattle prices ran up to a peak in late April, fell back and then rallied again into June.

From a cattle producers perspective, this encourages moving more cattle (primarily heifers) to feedlots instead of holding onto the stock to produce more calves.

Basically, taking the money and running, or cashing out, so to speak, as they respond to economic signals from the marketplace.

Another upswing in feeder cattle prices this month gives cause to validate an extension in feedlot placement rates this summer.

The same mentality coming from cattle producers was in evidence from feedlots during June (similar to prior months).

Feedlot marketings in June as a percent of cattle on feed longer than 120 days at the beginning of the month was 60 per cent.

This was the highest June marketing percentage since 2010. In the prior three months, however, this measure of the feedlot marketing pace was the highest in over 10 years.

A consequence of the bulge in feedlot placements in recent months is an increase in feedlot cattle supplies coming to market for the late summer or early fall.

Calculated inventories of cattle on feed between 90 and 120 days on 1 July are significantly higher than in past years.

The cattle futures market is working to accommodate the additional supply, with prices discounted from the current cash price by $5 per cwt. for the August and October time frame.

This discount should begin to have an pressuring effect on feeder cattle prices in coming weeks that could lead to a diminished rate of cattle moving into feedlots.

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

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