COF Report: Neutral to Prices

Posted on 03/09/2017 10:22 AM

USDA's Cattle on Feed Report came in about as expected. The June 1 feedlot inventory at 10.799 million head was right in line with expectations, as were May marketings. May placements were slightly higher than the average pre-report estimate at 10% above year-ago, but well within the range of expectations. As a result, the report gets a neutral read.

COF Report
USDA
Avg. trade estimate
Range
% of year-ago levels
On Feed
102
102.0
101.7-102.6
Placements
110
109.2
107.6-112.3
Marketings
105
105.0
102.3-107.7


While the number of cattle placed on feed was up sharply from year-ago, May 2015 placements were light, so it makes this year's number appear artificially big. Still, the trend of moving more animals into feedlots as calf supplies increase continues. A weight breakdown shows feedlots continue to heavily favor placing heavier calves, thus limiting their time on feed. In May, lightweight placements dropped 15.3%, 6-weight placements were down 3.8%, 7-weight placements rose 23.1% and heavyweight placements were up 19.7% from year-ago.

This report data is already priced into the market and therefore, it should have little impact Monday. Traders' focus is going to remain on demand and outside markets. Until those improve, upside potential is limited to corrective buying.

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