The August Cattle on Feed report is viewed as mildly supportive, relative to trade estimates. The July placement rate fell short of expectations, and the marketing rate was also a little lighter. However, August 1st cattle on feed at 104% of a year ago was right at pre report estimates. NASS counted 10,604 thousand head on feed at the start of the month, which is the largest in 5 years. Fed supplies will remain abundant into year end.
Total feeder cattle placements in July were just above last year, the largest since 2013. However, the monthly total was 54,000 head fewer than the average trade estimate at 1.615 million head. Feeder cattle placements were higher in all weight groups, but most of the increase over a year ago was realized in the heavier weight calves. We estimate an average placement weight of 730 Lbs or 3 lbs heavier than in June.
In the major cattle feeding states, placements in Nebraska were up 10% from a year ago, and accounted for the vast majority of the total placement increase as poor pasture conditions in the N Plains and limited forage supplies and pushed calves into feedlots. Placements in Kansas were down 3%, and placements in Texas and Colorado were each unchanged from last year.
The feedlot marketing rate in July totaled 1.74 million head, 71,000 head more than a year ago, but 13,000 head short of expectations. The marketing rate exceeded the placement rate for the 2nd consecutive month, and total on feed supplies were drawn down by 217,000 head from July.
The opportunity for a late summer rally in cattle and beef prices is quickly fading. Packers will bid for a full work schedule next week, and then for the holiday. September is usually a very slow period for demand and cattle prices are expected to stay steady to $1 lower each week, at least into mid-October. October cattle have turned range bound in the last 2 weeks but are oversold. The on feed report did not offer any bearish surprises, and our view is that any late summer/early autumn rallies should be used for 4th quarter sales. With record large production expected, there is still downside risk amid record large US red meat production.
