Smaller Cattle on Feed Inventory Says Beef Supplies Will Stay Tight

Larger-than-generally expected January placements boost Feb. 1 on-feed inventory above expectations, which is bearish for fed cattle trade Monday.

Published on: Feb 21, 2014

Friday's USDA Cattle on Feed Report points to tighter supplies, but not as tight as traders generally expected in advance of the report. .

Placements in feedlots during January totaled 2.03 million, 9% above 2013. Traders expected roughly a 2.6% hike in placements.

Larger-than-expected January placements pushed the Feb. 1 cattle on feed inventory to 10.760 million head, down 3% from Feb. 1, 2013. Traders expected the on feed inventory to be down about 5.2%.

January marketings, at 1.788 million, were 5% below 2013, not far out of line with the 4.6% reduction traders expected.

Net placements were 1.96 million head. During January, placements of cattle and calves weighing less than 600 pounds were 470,000, 600 to 699 pounds were 440,000, 700 to 799 pounds were 560,000, and 800 pounds and greater were 559,000.

Larger-than-generally expected January placements boost Feb. 1 on-feed inventory above expectations, which is bearish for fed cattle trade Monday.
Larger-than-generally expected January placements boost Feb. 1 on-feed inventory above expectations, which is bearish for fed cattle trade Monday.

Still, February marks the 17th straight month of smaller year-on-year inventories. That continues to say beef supplies will continue to tighten for the foreseeable future.

So far this year, beef production is down 8.6% with cattle slaughter down 8.5%.That says beef and cattle prices should stay firm to record high, barring any major unexpected demand disruption.

Market striving for new equilibrium
A combination of tight beef supplies and short-bought retailers with advertising features that they needed to fill drove January's beef cutout and cash fed cattle price spike.

Choice cutout surged from just over $200 on Jan. 2 to $240.05 on Jan 22, before skidding back to $208 last week. Now markets are looking for some sort of stability.

Winter storms across a huge swath of the nation disrupted demand for beef. Buying interest should improve with better weather as grilling season nears.

Continue reading after the jump >>>

Smaller Cattle on Feed Inventory Says Beef Supplies Will Stay Tight