USDA released its monthly Cattle on Feed report last Friday, confirming expectations for lower fed cattle marketings and placements during July. Marketings, at 1.787 million head, were down 9.2% compared to a year ago and were the smallest for the month since the current data series began in 1996. While July marketings were slightly below the range of expectations (Table 1), making the reported marketings figure bullish to nearby slaughter cattle prices, the nearly 10% reduction is consistent with the year-over-year decline in fed steer and heifer slaughter in July.

July Placements were also the smallest since the data series began in 1996. The 1.56 million head placed on feed last month was 7.4% lower than a year ago (Table 1). This was slightly higher than the average of analysts’ pre-release expectations; however, those expectations varied widely. The reduction in last month’s placements is consistent with increasingly tighter feeder cattle supplies, relatively good pasture and range conditions that don’t require early weaning, and expansion plans that reduce the number of heifers placed on feed. While those factors generally hold across much of the nation, regionally, Northern Plains cattle feeding states placed more cattle on feed than a year ago while Southern Plains states placed fewer head. Placements in Nebraska, Iowa, South Dakota, and Minnesota were up 1.4%, 16.7%, 5.3%, and 11.1%, respectively, compared to July 2013. Likely, feeders in these states were better able to take advantage of declining corn price levels and weakening corn basis due to plentiful old crop corn supplies in the region. Texas, Oklahoma, and Kansas placed 8.9%, 28.9%, and 5.9%, fewer cattle than a year ago.

Placements by weight category continued to follow the same pattern as the last several months – placing more light weight calves on feed and proportionally fewer heavy yearlings. During July, cattle feeders placed 425,000 head of calves weighing less than 600 lb. That is 9% more than a year ago. However, placements of 600-699 lb, 700-799 lb, and 800-plus lb feeder cattle were down 3.7%, 20.2%, and 10.2%, respectively. The average placement weight of cattle in July was 698 lb, the same as in June 2014 but about 12 lb less than a year ago.

The reduction in placements and marketings resulted in 1.9% less cattle on feed on August 1, 2014. The 9.837 million head on feed was the smallest August 1 on feed total since 2009 but was slightly above expectations (Table 1). South Dakota’s cattle on feed totaled 190,000 head on August 1, 2014, which was 5.6% higher than a year ago.

Overall, the August Cattle on Feed report will likely be viewed as neutral to somewhat bearish by the trade due to the slightly higher-than-expected August 1 on feed inventory. While marketings were lower than expected (bullish to nearby futures), placements were higher than expected (slightly bearish to deferred futures). Thus, some bull spreading may be evident in the Live Cattle futures market early in the week.