Live cattle futures traders on Monday took live cattle futures lower on the open after a USDA report on Friday showed a larger-than-expected number of cattle populating the nation's feedlots.
February live cattle recently traded at $1.0725 a pound, down 0.70 cent a pound, or 0.65% on the Chicago Mercantile Exchange, while April was off 0.77c, or 0.68%, at $1.1190.
January feeder cattle was unchanged at $1.2635, and March was off 0.30c, or 0.24%, at $1.2525.
The report showed the number of cattle placed into the feedlots for fattening in December rose 16% from a year earlier to 1.795 million head, about two percentage points more than expected, partly because December 2009 placements were slashed by harsh weather conditions.
The number of cattle sold for slaughter was larger than a year earlier at 1.827 million, but this was about what traders expected.
The result was about 5% more cattle in the feedlots than a year earlier at 11.517 million head.
Some traders said the higher-than-expected placements were pressuring summer months of live cattle. The large marketings rate could support nearby delivery months but not as much since the figure was near pre-release forecasts.
Others said December placements were biased toward heavy feeder cattle and may not have much effect on summer months. Besides, the larger marketings figure was already in the market, they said.
Outside markets appear to be running on autopilot ahead of the Federal Reserve meeting on Tuesday and Wednesday and the consumer confidence report Tuesday, said Mike Zuzolo, analyst/broker at Global Commodity Analytics. Traders will be watching for any release about a change in focus concerning the U.S. money supply, but a comment was not expected until after the meeting.
The semi-annual cattle inventory report is due out Friday and many traders said they expected the report to show a declining herd size. Cow slaughter rates last year were up, and the percentage of young, unbred females, or heifers, populating the feedlots through the year was higher than normal, which suggested producers were selling the heifers rather than keeping a few for breeding to replenish the cow herd.
Feeder cattle futures could see some pressure if deferred months in live cattle are pressured, analysts said. But a growing unease about the supplies of feeder cattle from here on out could bring in some speculative buying to lend support.
Brokers and traders said they continued to be impressed with the strength of wholesale beef prices. Higher wholesale prices imply that consumers are willing to keep paying higher prices for beef, which means packers can pay more for cattle to slaughter and process.
The U.S. Department of Agriculture reported its choice composite wholesale beef price Friday was up $0.71 a hundred pounds to $173.52. Select beef was off $0.22 at $170.64. The volume of steaks and roasts sold was a light 139 loads, and there were 31 loads of trimmings and coarse grind product reported.
The USDA reported cattle slaughter last week at 630,000 head, compared with 628,000 the week before and 670,000 a year ago.
The latest HedgersEdge packer margin index is a plus $27.70 a head, compared with the previous estimate of a plus $19.00. This is a rough estimate of packer returns on the cattle they slaughter and process expressed in the form of an index.
Urner Barry's Yellow Sheet, a trade publication, on Friday reported limited demand, which is somewhat typical for the close of the week. Prices for end cuts edged higher. Ground beef remains firm with escalating price levels.