The U. S. feedlot cattle supply is the smallest in seven years, the U. S. Agriculture Department reported March 19, confirming trade forecasts.
Contraction of the U. S. cattle herd has helped lift cattle prices to their highest level since late 2008.
The cattle supply has decreased because producers have lost money for nearly two years. The losses were due to high feed prices and later a recession that slowed beef sales and drove down cattle prices.
The smaller cattle herd, coupled with rising beef prices, have turned cattle prices higher and profitable again.
The USDA report was expected to produce some light selling of Chicago Mercantile Exchange’s cattle futures early this week as there may be some investors who had expected an even smaller supply, said Dennis Smith, broker with Archer Financial Services.
“No surprises. Anybody who was looking for a bullish report did not get it. Odds are this could generate a little bit of selling,” said Smith.
USDA on Friday reported there were 10.864 million cattle being fattened in feedlots on March 1, down three per cent from a year ago, and the smallest number since March 2003.
The report also showed February cattle placements at 1.665 million head, down about one per cent from a year ago, and February cattle marketings at nearly 1.72 million head, up two per cent from a year ago.
Those numbers were very close to trade expectations.
Analysts noted that one element of the report, a five per cent increase in the number of heavyweight cattle placed in February, could prompt light selling on the summer CME cattle futures contracts. That would be when those cattle would be marketed.
“They will be finishing out in the summer and that could pressure August,” said Allendale Inc. analyst Rich Nelson.
“The weight breakdown would be slightly bearish to the June cattle. The category that goes into June is 105 per cent,” said Jim Clarkson, analyst with A&A Trading Inc. “Numbers in June will be adequate, they won’t be as tight as they are right now.”
Because USDA’s numbers were close to trade forecasts, University of Missouri agriculture economist Ron Plain said the cash beef and cattle markets will have more influence near-term cattle futures than the report will.