The results of the February Cattle on Feed report is viewed as bearish for CME trade early next week. The January placement total was well above expectations, which put the February 1 on feed total slightly above estimates. Ahead of the report, the average expectation was for an on feed total at 107% of last year, while the actual figure was 108%, or a difference of about 93,0000 head.
Once again, it was the monthly placement total that offered the surprise in the monthly on feed report, with a placement rate of 104% of a year ago versus expectations of 100%. Feedlots also placed 141,000 head more than were marketed, which took the inventory total to the largest level since March of 2012. Placements in the major feeding states were unchanged from a year ago in both Kansas and Nebraska, while placements in Texas were at 111% of last year for the largest January figure in 4 years. Placements in Iowa were at 102% of last year and also the largest January placement total for the Cornbelt state on record. Compared to December, total placements were up 15%; however, there is a big spike in the number of heavy weight cattle placed. The average estimated placement weight is 722 lbs, 21 Lbs heavier than in December but just 4 Lbs heavier than a year ago.
The feedlot marketing rate was right at expectations at 106% of last year, or 1.858 million head, which also aligned with the monthly Livestock Slaughter report data that had been released on Thursday. Total steer/heifer slaughter for the month was reported at just over 2.13 million head or 122,000 head more than a year ago. The slaughter total was 6% larger than a year ago, though, there was 1 additional working day during the month, and the average per day slaughter was just 1% larger.
The last several On feed reports have produced big moves in the cattle market, and our expectation is that this report will pressure the trade early next week. The cash market through the 1st quarter has gone $5-6 higher than we had expected. However, we think the outlook is for the next several quarters is more bearish and we continue to advise sales on rallies.