Market News

Cattle placements jump 15%

We’re probably going to see more cattle on the market in the coming months.

David Anderson, Livestock Marketing Specialist at Texas A&M University, tells Brownfield the placements tell the tale in the most recent USDA cattle on feed report, “It’s important to remember that last February was the smallest February cattle placements ever, but this time we’re up 15% and what it really means is with total cattle on feed down 1% from a year ago, we’re looking at, as we get into the summer, as those cattle are finishing, that we might see more cattle supplies. We’ll get away from the tight supplies and get a little more beef on the market.”

Anderson does caution that any expansion in the U.S. herd is going to be at least partially dependent on weather and feed costs.

USDA reports placements of cattle into feedlots during February were even larger than expected. Placements last month came out at 1.650 million head, up 15% on the year, and above the average estimate, which called for a 9.7% increase, taking advantage of record cash prices and lower feed costs. Most of those placements were heavier weight cattle. Placements of cattle weighing less than 600 pounds were 390,000 head and 600 to 699 pound placements were 330,000 head, while 700 to 799 pound placements were 415,000 head and placements of cattle 800 pounds and heavier were 515,000 head.

Marketings during February were pegged at 1.549 million head, down 3% on the year and the lowest for the month since the series of reports began in 1996.

The total number of cattle on feed in the U.S. on March 1, 2014 was reported at 10.790 million head, 1% less than on March 1, 2013.

Other disappearances were 71,000 head, a year to year jump of 18%.

  • Cattle futures (LE) have been trading erratic for days.

    Ran up from 144 into the close to end the day at 145.15 on 3/14.

    Stayed in that range for a few days and closed at 145 on 3/18

    Then in the after hours session cattle opened up at 138. That’s a $7 drop.

    Now the way cattle ticks is pretty confusing. There are several different published ways to measure it. The way I have it figured is as follows:

    1 Tick = .025
    Tick value += $10- per tick
    If the futures contract moves from 135.000 to 136.000 it must move 40 ticks. (1 point divided by .025=40)
    So if the contract moves 1 point or $1 and you own one contract you have a $400 gain/loss.

    In the above move from $145 – $138 you have a $7 move or 7 points.

    Since we figured out at 1 point move is $400 then if you were an individual futures trader and you were holding 1 buy side contract at close you realized an immediate $2800 loss at open of the evening electronics session. Now if you were a farmer hedging risk or a heavy trader with 50 or 100 contracts you must have suffered a terrible loss.

    Am I reading this right? What the heck is going on in the live cattle futures market?

    Note: On 3/20 at around 11:15 am EST cattle had a breathtaking 2 point drop inside of 20 minutes.

    I have been staying out of cattle for weeks now and will continue to do so until some of this volatility lets up. If I wanted breathtaking moves I could trade oil and soybeans. I prefer something a little calmer like corn or soybean meal.
    Your comments and insight would be appreciated.

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