September Cattle on Feed Report contains major surprises – in a good sort of way

Dr. Curt Lacy (UGA)

The September Cattle on Feed report delivered by USDA on September 23, 2011 surprised the industry with some good news. According to the report, on September 1, 2011 there were 10.7 million head of cattle on feed in feedlots with over 1,000 head capacity. While this number is 5 percent above September 1, 2010; it was noticeably less than what private analysts were anticipating (see chart below).

2011 09 24 AugustCOFReport-sep242011

In many instances, it is the difference between what the report actually says and what traders were expecting that causes significant short-term movements in markets. For this particular report, the panel of analysts that were surveyed prior to the report’s release guessed wrong, to the likely benefit of cattlemen, for the major indicators. Basically, traders overestimated the number of cattle that were placed in August, underestimated the number marketed during the month and overestimated how many were actually on feed.

Other important facts reported by USDA include:

  • Total marketings totaled 2.05 million, 7 percent above 2010.
  • Total placements were 2.25 million, 1 percent below 2010.
  • Average placement weights continue to be below those normally seen for this time of year as cattle weighing less than 600 pounds were 44 percent the numbers placed last year for the same time period.
  • Placements in TX were 14 percent year ago levels while those in Iowa were 2 percent below one year ago. This is yet another indication of the severe drought conditions. It also seems to confirm what many have been reporting and that is, some brood cows are being sent to feedlots in hopes of returning them to the ranch when it finally does rain.

The primary implication is that feeder and live cattle prices should be higher in the next few days unless of course the negative economic news carries more weight with traders.

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