Beef Markets Drift Lower Despite Friendly Inventories

Beef Markets Drift Lower Despite Friendly Inventories

A bit larger than expected uptick in cattle on feed, large cold storage meat stocks and weather fears keep pressure on beef prices

Based on producer surveys USDA's National Agricultural Statistics Service tallied the total U.S. all cattle and calf herd on July 1, 2012 at 97.8 million head. That's down 2.2% from the 100.0 million head total on July 1 last year. On average, traders expected a 1.4% reduction in the total dairy and beef cattle inventory.

All major categories in the inventory report came in less than the average trade guess in advance of the report. Such numbers would normally be construed as market friendly.

A bit larger than expected uptick in cattle on feed, large cold storage meat stocks and weather fears keep pressure on beef prices

However, fed cattle futures drifted lower after the report. Feeder cattle futures were locked limit down prior to the report. That all suggests the market is more focused on weather developments than on head counts.

Cattle producers have faced one of the most rigorous weather challenges since July 1 than during any other three-week stretch in recent memory. Fading beef cow and packer sow prices suggest producers of both species continue to step up marketings of breeding stock to trim feed bills and most effectively use whatever they have left of drought-reduced feed supplies.

The huge specter of drought in the background suggests markets will largely ignore the reports.

Other heifers weighing over 500 pounds not kept for beef or dairy replacements were down by 200,000 head on July 1. Steers weighing over 500 pounds were also down 200,000. All heifers weighing less than 500 pounds were 700,000 lower than a year ago. Add them together and you conclude the feeder cattle supply outside of feedlots was down 1.1 million head from a year ago.

Drought is undoubtedly herding feeder cattle off pastures sooner than ranchers intended. That suggests near term cattle on feed inventories and beef supplies will be higher than they otherwise would have been. Longer term beef supplies out into 2013 will be even tighter.

Cattle on feed numbers. Cattle and calves on feed for slaughter market in the United States for feedlots with capacity of 1,000 or more head totaled 10.7 million head on July 1, 2012. The inventory was 3% above July 1, 2011. The inventory included 6.74 million steers and steer calves, up 4% from the previous year. This group accounted for 63% of the total inventory. Heifers and heifer calves accounted for 3.92 million head, up 1% from 2011.

June placements totaled 1.66 million, 2% below 2011. Net placements were 1.60 million head.

During June, placements of cattle and calves weighing:

* Less than 600 pounds were 460,000.

* 600 to 699 pounds were 320,000.

* 700 to 799 pounds were 390,000.

* 800 pounds and greater were 494,000.

June fed cattle marketings totaled 1.97 million, 6% below 2011. This is the lowest fed cattle marketings for the month of June since the series began in 1996.

Cattle on feed July 1, 2012, from all feedlots in the United States, totaled 12.3 million, up 1% from the 12.2 million on July 1, 2011. Cattle on feed in feedlots with 1,000 or more head accounted for 87% of the total cattle on feed on July 1, 2012, up from 86% last year.

Those figures suggest:

* Attractive crop prices are enticing smaller farmer-feeders to exit the cattle feeding business and focus on crop production.

* Whipsawing cattle and feed prices are pushing such operators to exit cattle feeding.

* Most likely some of both are occurring.

Freezer stocks up or down depending on benchmark. Total red meat supplies in freezers June 30 were down 6% from the previous month, but up 15% from last year.

Total pounds of beef in freezers were down 5% from the previous month, but up 9% from last year.

Frozen pork supplies were down 7% from the previous month, but up 20% from last year. Stocks of pork bellies were down 25% from last month, but up 1% from last year.

Total frozen poultry supplies on June 30, 2012 were up 5% from the previous month, but down 6% from a year ago. Total stocks of chicken were up 1% from the previous month, but down 14% from last year. Total pounds of turkey in freezers were up 10% from last month and up 8% from June 30, 2011.

Beef Markets Drift Lower Despite Friendly Inventories

TAGS: Regulatory
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