CME: Cattle Placement Weights Heavier This Fall

 The table below shows the average of the estimates for each category as well as the range.

Pre-report estimates continued the new-normal very wide spread on placements. This month, analysts predicted placements would be up and down, but the consensus from most analysts was that placements in November would be above a year ago.

Analysts are weighing several factors heading into the report. Feeder imports from Mexico and Canada were below a year ago, while auction receipts were up. The seasonal trend between October and November is sharply lower.

Over the history of the Cattle on Feed report, the average decline in placements between those two months is nearly 600 thousand head. The average pre-report placement estimate calls for about a 400 thousand head decline.

This fall, placement weights have been heavier, a product of good grass conditions incentivizing stockers to put additional weight in the field and the timing of the Holcomb, KS fire effect on prices, delayed placements of calves and long yearlings.

The price effect is worth exploring further. Closeouts in feedlots in the Southern Plains faced negative returns in June- October. This assumes a 750 lb placement weight. Feeder prices for those weights were below a year ago at the time but fed cattle prices eroded quickly in the second half of 2019, falling 2.6 percent in the third quarter and will average close to a year ago in the fourth quarter.

November feeder cattle weighing 700-800 lbs, averaged $148.81 in Dodge City. Cattle placed at that cost are facing a futures market board that has fed cattle prices moving above breakeven projections. The LMIC estimates breakeven for those cattle to be between $115-117 per cwt, assuming six months on feed. The June live cattle futures contract is $119.08 at the time of this writing.

Feedlots are expected to make large profits for December closeouts, and most of the first half of 2020. Dramatic drops in the feeder cattle prices as a result of the Holcomb, KS fire will result in December closeouts seeing the very large returns to cattle feeding. Breakevens for that month are expected to be below $110 per cwt.

Fed cattle prices for all grades in the 5-area have averaged above $118 per cwt in the early part of December.