The June Cattle on Feed report is viewed as neutral to slightly bearish relative to expectations. NASS reported a May placement figure of 112% of last year versus expectations of 110%, while the marketing rate of 109% was right at expectations. The combined figures resulted in a 98,000 head increase in cattle and put June 1 on feed supplies at 103% of a year ago versus the average trade estimate that called for 102%.
NASS reported that 2.2 million head of feeder cattle were moved from pasture to feedlot during the month of May, which was the largest May placement rate in the last 12 years. Placements increased in almost every state, with the largest increase noted in TX where placements were up 80,000 head (14%) over last year. NE placements rose by 40,000 head (10%), and feedlots in KS put in 20,000 head (5%) more than they did in May of last year.
Feeder cattle supplies outside of feedlots in January were estimated 2% over a year ago, and at a 6 year high of 26.6 Mil head, while the chart shows that cumulative placements for the year have been 9% over last year, and the largest since 2003. Cumulatively, feedlots have placed 9.8 million feeder cattle or a record large 37% of the January inventory total.
The May feedlot marketing rate was up 9% from a year ago at 1.95 million head, with 1 additional working day during the month, but on a per day basis the marketing rate was still 5% larger than last year. The Slaughter report on Thursday showed a total steer/heifer slaughter for the month of 2.194 Mil head, and the largest fed cattle kill in 4 years. The strong cattle basis has pulled supplies forward and the average carcass weight of 816 Lbs was 26 Lbs lighter than a year ago, and the lowest since 2012.
CME cattle futures end the week at very oversold levels, and assuming that basis returns to more normal levels, downside risk at the CME should be limited from. The CME is pricing in an average 3rd quarter price of $115 versus the USDA’s latest forecast of $119. However, basis has held at historic levels for many months, which has made the cattle futures a very difficult call.