By Daniel Grant
ILFB
31/01/2007
Cattle prices for the time being could erode and be confined to the mid-$80 range, based on reaction to the USDA cattle on feed report released Friday.
Cattle and calves on feed in the U.S. as of Jan. 1 totaled 12 million head.
The inventory was up 1 percent from a year ago and marked the highest total for that date since at least 1996, USDA reported.
Meanwhile, placements in feedlots took a hit, but not to the extent expected, according to Dale Durchholz, analyst with AgriVisor Services.
The report "was a little negative in the sense that the placement number was a little higher than people expected to see and the marketing number was a little under what people expected to see," Durchholz said.
Placements in feedlots in December totaled 1.71 million head, a 9 percent decrease from a year ago.
Marketings of fed cattle in December declined 5 percent from a year ago to 1.63 million and reached a low point for the month since at least 1996.
"Now, with corn prices having stepped higher at the beginning of January, we'll probably see placements get hit" even worse, Durchholz said.
The slightly bearish report near-term could push prices into the mid-$80 range, Durchholz said.
The winter weather that some hoped would maintain or even temporarily boost prices short-term apparently may balance itself out, according to the analyst.
"The cold weather will slow gains a little bit, but it also freezes the feedlots and clears up the mud situation," he said.
Regardless of the weather, the feeder cattle market remains "troublesome" for cattlemen, he said.
"As long as corn prices move higher, feeder prices are going to implode," Durchholz said.
The positive marketing news is that if animal weights decline below levels of a year ago, it may counteract the effect of the larger inventory on beef supplies.
Steer weights that currently are 835 pounds could decline to 800 pounds by April or May, Durchholz projected.
"If demand can hold together, there still is reason to think we could see cattle prices move upward into the $90s in April and May," he said.
He looked for little if any help from the export sector, though.
Japan still will not import U.S. beef from cattle older than 20 months, and South Korea has not accepted a U.S. beef shipment despite removing its ban on U.S. imports last October.
"Nobody is going to get real optimistic about beef exports until we actually see something," Durchholz added.
