Feeder cattle prices rally on low US feedlot placements

25.10.2016

Live cattle prices in Chicago rallied to a four-week-high, following data which showed that that the number of cattle in US feedlots at a record low.

Friday's Cattle on Feed report, from the US Department of Agriculture, showed placements, the number of cattle moved off pasture onto feedlots, at 1.905m head in September, well below analyst expectations of 2.011m head.

This was down 2.0% compared to the same time last year, and a record low for the month of September.

The total number of cattle on feedlots as of October 1 was seen at 10.266m head, marginally up from last year.

Analyst forecasts pointed to a rise of 1.3%.

Prices rally

Live cattle prices extended last the previous session's rally on the news.

In addition to the placement number, Steve Wagner at CHS Hedging noted that "the market has been trying to bottom for two weeks".

"You had traders trying to cover their shorts before the report," Mr Wagner told Agrimoney.

"The report should give us further strength," he said.

Holiday buying

As well as short-covering, seasonal dynamics are supporting cattle prices.

Retailers are buying ahead of the holiday season, when consumer demand for meat, particularly premium meats, rises.

"This is an opportunity for the market to rebound seasonally," said Mr Wagner, noting that the retailer buying should "run at least to December 1".

December live cattle prices in Chicago were up 2.5%, at 104.375 cents a pound, in afternoon deals, after reaching as high as 104.75 cents.

Support for feeder cattle

The strength in live cattle added support to feeder cattle, which are pasture raised animals ready for feedlot placement.

And cheap feed prices could also support feedlot placements, as it makes feeding grains more economical.

"The fact that corn is down certainly isn't hurting feeder cattle," said Mr Wagner.

The question now is will feedlot numbers increase, thanks to higher fed cattle prices.

"Those calves are out there," Mr Wagner said, adding that it now depends on what prices ranchers would demand from feedlots.

"If we see much higher prices, we'll see those cattle move," he said.

Feeder cattle prices for November were up 2.5%, at 122.725 cents a pound in afternoon deals.


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