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Agricultural News

Placements Surge Beyond Expectation in Latest Cattle on Feed Report, Dr. Derrell Peel Explains Why

Fri, 27 Jan 2017 16:24:30 CST

Placements Surge Beyond Expectation in Latest Cattle on Feed Report, Dr. Derrell Peel Explains Why Upon the US Department of Agriculture’s release of its Cattle on Feed report for January 2017 Friday afternoon, Radio Oklahoma Ag Network Farm Director Ron Hays caught up with Oklahoma State University Extension Livestock Market Economist Dr. Derrell Peel for his review of the numbers and initial reaction. The highlight of this report he says was the rather surprising placements number, that came out anything other than what it was expected to be.

According to Dr. Peel’s summary the January Cattle on Feed report showed on feed inventories that were just fractionally higher, at 0.3 percent compared to a year ago, with placements during the month of December were up 17.6 percent and marketings during the month of December were up 6.8 percent.

“Obviously, if there’s a surprise - and it is a significant surprise - in this report,” Peel said, “the placements came insignificantly bigger than pre-report estimates. Instead of being up 9 percent, we’re coming in up nearly 18 percent, so that’ll be the surprise.”

Based on that placement number, Peel predicts the market will react bearishly early next week. He rationalizes that several things are at play here that contributed to this figure, and even says the market may have been trying to tell us this would happen with the rally we saw in feeder cattle prices during the 4Q.

“Clearly there was some demand for those cattle and we see that reflected here in the number of cattle it moved in the feedlot,” Peel observed. “Some of it is month-to-month timing and you have to be a little careful with these things not to read too much into any one month because occasionally it’s just sort of lumpiness and we smooth it out over time.”

Reading between the lines here, Peel interprets these numbers as an indication that a significant amount of cattle were moved to feedlots after delaying them earlier in the fall as producers waited for a rebound in prices. However, the marketings number lends more of a positive tone to the report - indicating that we continue to move cattle aggressively through the system. This is also reflected in the slaughter numbers. All things considered, even with on feed numbers basically flat, Peel says he remains confident the industry will smooth out over time.

“Even though it’s crept back up to being even with a year ago,” Peel reassured, “we’re moving more cattle through feedlots, so the inventory is not bigger; it’s not equal to a year ago after being down for a couple months.

“And even though the placements were bigger on this one month in total, what we’ve done for several months now is actually marketed cattle faster than we’ve placed them.”

To view the latest Cattle on Feed report, click here.

You can listen to Dr. Peel’s complete analysis of the numbers in today’s Cattle on Feed report released by USDA, in his full conversation with Hays, by clicking or tapping on the LISTEN BAR below.



Listen to Dr. Peel's complete analysis of the numbers in today's Cattle on Feed report with Ron Hays
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