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Cattle placements bearish, but with some good news

The high number of cattle being placed in U.S. feedlots in December has added to bearish concerns about fed cattle prices. The heavy December placements indicate a greater number of finished cattle hitting the market later this year, according to Rich Nelson, chief strategist with Allendale.

“Keep in mind this was this month’s report, plus we also had last month’s heavy November placements, so we’ll see some summer cash prices probably down at that, we suggest $98,” he told Brownfield Monday. “That might need to be lowered here in the coming weeks, actually.”

The USDA’s latest Cattle on Feed report indicates that the number of cattle placed into feedlots in December is 17.6 percent over last year, and more than twice what analysts had anticipated.

Even though it’s bearish for the cattle market, Nelson says this is not all bad news.

“This is simply a sign, actually, of liquidation,” said Nelson. “We’re moving those extra heifers that were built up in past few years and kind of cleaning out the herd, and this is also combined with the heavy cow slaughter, which is going on right now too.”

What’s bearish for the market now, however, is that liquidation means more beef production, and Nelson says it will take most of the year before positive signs return to the market.

AUDIO: Rich Nelson (3 min. MP3)