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CME: December On-feed Count Likely at 7.5% Compared to 2016

21 December 2017

US - USDA’s National Agricultural Statistics Service (NASS) will release their monthly "Cattle on Feed" report this Friday at noon Eastern Time (earlier in the day than normal), reports Steiner Consulting Group, DLR Division, Inc.

Dr David Anderson, Professor and Extension Economist at Texas A&M University, provided pre-report comments earlier this week (see here). He gave some excellent insights on why placements of animals into Southern Plains feedlots during November were likely above a year ago.

In evaluating Friday’s NASS report, especially if the head placed is above the high end of the pre-report range, analysts will turn immediately to the placement weight breakdown table in that publication.

The accompanying table shows the average of the pre-report estimates and the range, as compiled by Urner Barry. Animals placed into feedlots and marketed during November are likely to be above 2016’s. As of 1 December, the on-feed inventory is expected to be 6 per cent to 7 per cent above a year ago.

In the financial markets, there are pre-report expectations, but as the actual report approaches, often the talking heads on TV turn to what is called the "whisper numbers". Those numbers are what traders and analysts are discussing after the pre-report estimates came out up to the release-time regarding adjustments or what the surprise might be. The whisper numbers are bigger than the average of the pre-report expectations for both placements and the 1 December inventory.

The adjustments are based on the potential for the year-over-year percentage increase in head placed to be double-digits (i.e., up 10 per cent or more). States supporting that growth would be mostly in the Southern Plains (e.g., Texas).

Besides the Southern Plains factors pointed out by Dr Anderson, nationally there may have been proportionally more heifers placed on-feed during November, even compared to the rather large levels of prior months. There were some indications of that occurring in the weekly breakdown of calf and yearling sales reported by USDA’s Agricultural Marketing Service.

If November placements are up 10 per cent year-over-year, that could put the 1 December on-feed count at 7.5 per cent above 2016’s (up about 800,000 head). If realized, the 1 December number of animals in commercial feedlots would be the largest for that date since 2011.

Monthly feedlot marketings are often overlooked because they are usually in line with pre-report estimates (note that most analysts use relationships based on USDA published steer and heifer slaughter data to estimate marketing’s).

Last year, November was when head marketed ramped-up year-over-year and compared to that of recent years (see prior 5-year average in the following graphic). Typically, November marketing’s are below October’s, however 2017 looks to buck that trend, again.

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