Cattle on Feed unexpectedly bearish

The USDA’s October 20 Cattle on Feed report stated the October 1 U.S. large-lot (1,000+ head) feedlot population at 11.58 million head, up 71,000 head (0.6%) above year-ago. That easily topped industry expectations that averaged 11.42 million and implies a negative reaction by the futures market on next Monday’s opening. As usual, the monthly placement figure was key to the result and the market’s likely reaction. September placements surged 125,000 head (6.1%) above year-ago, whereas traders expected a 2% annual reduction to 2.043 million head. This should theoretically prove most negative for deferred futures, since animals entering lots last month will mostly exit as fed cattle early next year, but selling will likely concentrate in most-active December futures. Traders expected a 6.8% annual drop in September marketings, but that was not the case, with the USDA result stated at 1.663 million head, down 10.6% annually. The drop partially reflected the loss of one workday in September 2023 versus last year, but the marketings reduction clearly fell well short of expectations. This is likely to be viewed negatively as well, since it implies that many more animals are still in feedlots.