Cattle on Feed Report: Bearish compared to expectations

USDA estimated there were 11.224 million head of cattle in large feedlots (1,000-plus head) as of Aug. 1, up 150,000 head (1.4%) from year-ago levels and 72,000 head more than the average pre-report estimate implied. The increase was primarily driven by a 1.8% increase in placements, whereas traders on average expected a 1.5% decline. Placements topped the highest pre-report estimate. July marketings also were a little lighter than anticipated at 3.9% under year-ago.

The increase in placements was almost entirely in the two lightest categories, with lightweights (under 600 lbs.) up 9.3% and 6-weigths up 9.8%. Heavyweight placements increased 7.1% versus year-ago, but only accounted for 75,000 head of the total. Placements declined 2.4% for 7-weights, 4.3% for 8-weights and 2.5% for 9-weights. On a state-by-state basis, placements were unchanged in Colorado, up 10,000 head in Kansas, up 10,000 head in Nebraska and up 25,000 head in Texas. That suggests drought pushed more calves into feedlots. Placements in “other states” declined 13,000 head from last year’s levels.

Given that all three categories were on the bearish side of the average pre-report estimates, cattle futures will likely face pressure on Monday. But none of the figures were bearish enough to greatly impact prices and rising cash cattle prices should limit selling, especially in nearby contracts.