Livestock will fill market plate
The United States Department of Agriculture cattle-on-feed report released after the close of markets Sept. 19 shows again that a lot of cattle are coming to slaughter plants in coming months.
Traders expected large numbers and bid futures contracts down during the week, but they were slightly higher than many thought. This sent futures further down once trading resumed Sept. 22.
The number of cattle on feed as of Sept. 1 in feedlots with more than 1,000 head capacity in seven key states was 119 percent of last year.
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Analysts had speculated the increase would be in a range of 116-120 percent. The number of cattle going into feedlots during the month was set at 107 percent of last year, at the top end of analysts’ 93-108 percent guess range.
Luckily, more cattle were being sold. Marketings were set at 106 percent of last year, also at the top of the analysts’ guess range.
December futures on the Chicago Mercantile Exchange have fallen $3 from a month ago. The fall was caused by the August cattle-on-feed report that featured heavy placement in July. With more heavy placements in August, February futures might fall.
The placements number might be a bit surprising given that corn prices rose strongly during August. But it seems more feeders were influenced by live December cattle futures at about $70.
There is a lot of beef around and there is going to be a lot of pork.
The Livestock Marketing Information Centre, a co-operative project of the USDA and state extension specialists, says growth in the American breeding herd is expected to result in large increases in hog slaughter for 1998. In fact, forecasts call for record large pork production in 1998.
Some of the surplus will be consumed through domestic population growth and exports will eat up another portion of it.
Still, U.S. per capita pork consumption in 1998 might be the largest since 1995. On a retail weight basis, consumption could increase about two pounds, boosting the total to just over 50 lb. per person.
Commercial hog slaughter combined with heavier dressed weights could push 1998 pork production up six to seven percent over 1997.
If the expected rate of herd growth materializes, prices will be under pressure. Preliminary forecasts suggest slaughter hog prices could average in the mid $40s per hundredweight in 1998, down from the high $40s today, with the fall quarter of 1998 averaging in the low $40s.
