Cattle Traders Look to Larger Supplies
March 23 2018 - 5:28PM
Dow Jones News
By Benjamin Parkin
U.S. cattle supplies are growing faster than expected.
The U.S. Department of Agriculture said on Friday that the total
number of cattle being fattened in feedlots as of March 1 rose to
11.7 million head, 9% above the same time a year earlier and above
pre-report estimates.
The number of cattle placed into feedlots in February rose 7%
from last year to 1.82 million head, well above average
expectations of 4%. Cattle sent to slaughterhouses that month rose
2%, also above estimates.
Those figures suggested that cattle supplies are large and will
continue to increase as more cattle reach their requisite slaughter
weights in the months to come. Anticipation of large supplies has
recently pressured the futures market.
But some analysts said that traders and meatpackers were already
poised to absorb those growing supplies. The monthly placement
number in particular has consistently come in above expectations in
recent months, often with limited market impact.
"We've got more cows, we've got more calves, therefore we've
seen more cattle placed on feed," said Trey Warnock, an analyst at
Amarillo Brokerage. "Some of that is rather normal."
Live cattle futures for April delivery fell 1.8% to $1.1605 a
pound at the Chicago Mercantile Exchange ahead of the report.
China's newly unveiled plan to levy tariffs on U.S. pork
pressured livestock markets generally on Friday. Though beef
exports to China are relatively small and unaffected by the duties,
traders are betting that increased tension could be bad for U.S.
agriculture more generally.
Futures are currently trading a significant discount to the cash
market for physical cattle. Meatpackers this week mostly paid
around $1.26 a pound for cattle to slaughter. The difference
between futures and cash suggested that traders expected futures to
fall sharply in the weeks to come, in large part because of the
anticipated growth in supply.
Write to Benjamin Parkin at benjamin.parkin@wsj.com
(END) Dow Jones Newswires
March 23, 2018 17:13 ET (21:13 GMT)
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