Friday afternoon we saw the USDA release its Semi-Annual Cattle Inventory, monthly Cattle-On-Feed, and monthly Cold Storage reports. Lets start off by looking at the Semi-Annual Cattle Inventory report. The USDA showed that all cattle and calves in the U.S. as of July 1,2005 were numbered at 104.5 mil head. This would be an increase of 900,000 head or 1% above last year. The total number of cows and heifers that have calved was pegged at 42.8 mil head, an increase of 300,000 head or 1% from last year. The breakdown in the cow numbers show an increase of 250,000 head in the beef cow category to total 33.750 mil head, and an increase of 50,000 head in the dairy cow numbers to total 9.05 mil head, all of which would be 1% increases over last year. Heifers 500 lbs and over numbered 16.2 mil head, an increase of 250,000 head or 2% over last year. The breakdown in the heifer category shows beef replacements up 4% or 200,000 head at 5 mil head, with the dairy replacements up 100,000 head or 3% from last year to total 3.7 mil head. Other heifers available for feeding totaled 7.5 mil head, a decrease of 50,000 head or 1% from last year. Steers 500 lbs and over numbered 14.4 mil head, this is an increase of 200,000 head or 1% over last year. Bulls 500 lbs and over numbered 2.1 mil head, an increase of 50,000 head or 2% over last year. Calves 500 lbs and under were counted at 29 mil head, this would be a slight increase of 100,000 head from last year. The 2005 calf crop was counted at 37.8 mil head, 175,000 head above last years calf crop. Total cattle and calves on feed in the U.S. were counted at 12 mil head, a 200,000 head or 2% increase over last year at this time. The number of feeder cattle outside feedlots totaled 38.9 mil head, an increase of 50,000 head over last year's number of 38.850 head. The report shows that the U.S. cattle herd is under modest expansion for the first time since 1996. This is evident by a 1% increase in cow numbers and 3% and 4% increases in beef and dairy replacement heifer numbers respectively. Couple this with the fact that cow and heifer slaughter numbers are tracking 6% to 7% below year ago levels, plus heifer and heifer calf on feed totals are 5% below year ago, and it shows producers are keeping females in the country to put them back into the production cycle. The report should be viewed as neutral, and as is usually the case, will likely not have much of an impact on the market. It is more of a gauge as to the trend of contraction or expansion, and as is the case in this report shows that numbers have likely bottomed out and we should expect to see cattle inventories grow as we move forward.
Next up we saw the numbers on our feedlot population. Cattle-On-Feed in the U.S. as of July 1, 2005 totaled 10.402 mil head. This is an increase of 270,000 head or 3% over last year. Placements during the month of June totaled 1.769 mil head, an increase of 122,000 head or 7% from last year. Marketing's of fed cattle during June totaled 2.073 mil head, a decrease of 12,000 head or 1% from last year. The report will be viewed by most as slightly bearish, as the on-feed numbers and placement numbers came in 1% and 2% above what most analysts were looking for. Breaking down the numbers we see northern cattle feeders continue to do a good job of marketing cattle, as Co, NE, and SD on-feed numbers are running 3%, 2%, and 7% below year ago levels respectively. Conversely we see on-feed numbers in the southern plains running 5% higher in KS, 2% higher in OK, and 7% higher in TX. We could be setting ourselves up for a two-tiered market, with higher prices being paid in the north and lower in the south as southern feeders lose bargaining power due to backed up marketing's. The weight break down in the placement category shows a continuation in the trend of placing heavier weight cattle against the early to middle fall market. Placements of cattle weighing under 600 lbs totaled 412,000 head, a decrease of 48,000 head or 11% from last year. Placements of cattle weighing 600 to 699 lbs totaled 347,000 head, a decrease of 12,000 head or 4% from a year ago. Placements of cattle weighing 700 to 799 lbs totaled 480,000 lbs, an increase of 27,000 head or 6% from a year ago. Placements of cattle weighing 800 lbs plus, totaled a whopping 530,000 head, an increase of 155,000 head or 41% above last year. Since May we have now placed 280,000 head more cattle in the 800 lbs plus category, as there was a 125,000 head increase during that month. Looking at such an increase in numbers of heavy weight cattle, one would want to get a little bearish the Sep, Oct, and Nov market. However, we need to keep in mind that calf placements since the first of the year have averaged about 9% below the previous year, so we are just filling a little marketing hole that we were creating. An area of concern, however, is the growing front-end supply of cattle on feed 120 days or more, especially in the south due to the reduced marketing's rate. Marketing's in the south last month were running 14%, 9%, and 3%, below last year respectively in KS, OK, and TX.
Last but not least was the USDA's monthly Cold Storage report on Friday. Here again, the report has little market moving potential, but it still gives us an idea if meat is moving along through retail and export channels or not. The USDA reported total beef stocks in coolers across the country as of June 30, 2005 were at 339,848 mil lbs. This is a decrease of 71,919 mil lbs or 17% from last year, due to a 3% reduction in FI slaughter numbers from a year ago. We do however see an increase of 21,585 mil lbs or 7% from last month, as demand has been less than stellar as of late and we see an increase in carcass weights. Competing meat supplies seem to be in check, as we see an 11% decrease in chicken supplies from last year and a 15% decrease in turkey supplies compared to last year. There was an increase in pork supplies in coolers from last year of about 7%. The numbers should not be worrisome as of right now, however it is going to be very important for us to get our export markets back, in order to keep cooler stocks of beef backing up in a burdensome way, as we head into a period of increased production in the coming months and years.
We left last week with a $79 to $79.50 live fed cattle market in the north and south, with dressed prices at mostly $1.25. This would be mostly $1 to $2 lower then the week previous. A combination of slow beef demand causing the cutout to slide, news of the Canadian border opening to live cattle imports, and cattle feeders wanting to remain current, led them into selling cattle at lower money last week. Feedlot movement was very good in the north again, so there should be very little carryover coming into this week. We probably could have seen a few more cattle move down on the southern plains, and this again remains an area of concern. Weakness in the fed cattle market and psychological affects of the Canadian news, pressured feeder cattle prices as well. For the week heavier weight cattle end up losing $2 to $4, with calf prices sliding by $3 to $5. Cow prices also lost money to the tune of $2 to $4, as an increase in sale barn receipts, faltering ground beef demand, and an increase of fed cattle trimmings had cow killers doing everything in their power to keep fresh 90% boneless beef moving out of their plants. Looking ahead to this week, we could very well be getting close to a seasonal low in both the cash fed cattle market as well as the boxed beef trade. Fed cattle numbers are expected to be about even with last week, if not a little bit below, and the fact that packers were still in the market late Friday and willing to pay $79.50 for cattle is encouraging for prices this week. This however will, be counteracted by packers likely reducing the kill in order to improve margins, yet we feel demand will start to pick up, as the heat starts to moderate throughout much of the country, and beef buyers start gearing up for Labor Day buying. Feeders could remain under pressure, with the biggest declines being noted in the calf market, and a reduction in the fed cattle kill should reduce the amount of fresh trimmings and grinds off the market, thus stabilizing the 90% market and supporting the cow market.
Last week kill was estimated at 653,000 head with a Friday kill of 119,000 head and a Saturday production schedule of 41,000 head. Last weeks production was 1,000 head above the week previous and 7,000 head above last year. The increased production in the face of softening demand sent boxed beef prices considerably lower last week. For the week we see declines last Friday to Thursday of $4.34 on choice values, and a $4.87 slide in select carcasses. Friday saw another $1.67 loss on the choice cutout to settle at $126.97, with the selects closing $2.24 lower at $121.26. Movement for the week was very good as we see 1,922 loads of cuts being sold, compared to 1,608 the week before. Coming into the week packer inventories of meat at the plant level were becoming burdensome, so they decided to have a sale and clear excess supplies. Coming out of last week packers report being in a much better position, with some increased interest from the foodservice and further processing sectors of the industry. This along with increased interest for getting coverage for the month of August and Labor Day needs should provide some support to the boxed beef market as we head into the end of the week.
As mentioned previously we could be nearing a seasonal low in the boxed beef trade. For reference we are now within a couple of dollars from last years low on the choice cutout, which was $124.10 set back on 2-13-04. The select cutout made its low last year on 2-12-04, at $117.20. We will look for the boxes to start out on the defensive early in the week, with support being found near mid-week around the above-mentioned prices.
Futures ended the week with mixed prices on Friday as we see the fat cattle contracts closing $.30 higher to $.12 lower, with the feeder cattle contracts closing $.15 higher to $.37 lower. It was a low volume session on Friday as everybody was waiting for the numbers to be released by the USDA. As far as the reports go, the only reaction we will likely see is from the Cattle-On-Feed report due to the increased placements and total on-feed numbers. We will look for a $.25 to $.50 lower open, with most of the pressure falling on the Oct and Dec contracts. The bull spreads should work again today, and I would use any further weakness in the Oct fat cattle contract to establish long Oct live cattle / short Oct feeder cattle spreads. August live cattle should find good support at the $78 level, however a close below it opens up the door for another couple of dollars to the downside.
