Any way you look at it, fewer fed cattle marketings lie ahead. That spells higher prices. The market already knows higher prices are coming. That's why October 2013 fed cattle futures, at roughly $135, are carrying an $8 premium over October 2012 futures.
Friday's USDA Cattle on Feed Report provides the market bulls with more cannon fodder.
From producer surveys, USDA's National Agricultural Statistics Service estimated feedlots placed 2.004 million cattle in September. That was 81.2% of September 2011 and a good bit below the average trade guess of 85% of last year's figure.
Tightening supplies of feeder cattle as well as negative feeding returns limited placements last month. Pricy corn also discouraged placements.
Feedlots marketed 1.598 million cattle in September, 88.1% of September 2011 marketings. On average traders expected marketings to be 89.8% of last year.
Two fewer weekdays but one more Saturday in September this year, compared with 2011, contributed to the year-on-year decline in marketings. Weakening meat packer margins also held down slaughter rates. Lower slaughters are continuing so far this month.
Despite lower marketings, sharply lower placements pulled the Oct. 1 cattle on feed inventory in feedlots with 1,000 head or more capacity down to 10.989 million head, 97.4% of a year ago. Traders expected a 2.2% reduction to 97.8% of the Oct. 1, 2011 value.
Lower than year earlier placements in seven of the first nine months of 2012 are pulling cattle on feed inventories lower. So far this year feedlots have placed about 1.019 million fewer cattle than last year.
Smallest placements on current records. September's 2.004 million placements were almost 140,000 lower than any September placement level since USDA launched the current cattle on feed series in 1996. The previous low was 2.141 million head in 2001. Last September feedlots placed 2.469 million cattle. September 2010 placements totaled 2.463 million. So this year's September placements are almost 500,000 head lower than September placements in each of the past two years. Both 2010 and especially 2011 saw some impact from drought pushing September placements higher.
Plus the shrinking beef cow herd is turning out fewer calves. The 30.5 million head beef cow herd on July 1, 2012 was down almost 3% from 2011 and down 4% from July 1, 2010.
Cattle on feed inventories and feedlot placements will continue to run below year-earlier levels for the foreseeable future.