USDA issued on Friday, September 21 its latest update on the number of cattle on feed as of September 1, 2012. The report will likely be viewed as moderately bullish by futures markets as a reduction in feedlot placements was notably larger than pre-report estimates. Below is a brief recap of the report and implications:

• Total inventory of cattle on feed as of September 1, 2012 was 10.637 million head, 63,000 head or 0.6% lower than a year ago. Pre-report estimates were expecting the total inventory to be down about 0.1%.
• Feedlots placed 2.002 million head of cattle on feed in August, 244,000 head or 10.9% fewer than a year ago. Prior to the report analysts on average were expecting placements to be down 7.3%.
• The marketings number was somewhat disappointing but understandable given the tug of war between feedlots and packers, both feeling significant margin pressure. The survey pegged the total number of cattle marketed at 1.960 million head, 4.5% lower than a year ago

The latest USDA cold storage survey indicated that at the end of August total stocks of beef, pork and poultry were 2.221 billion pounds, 6.0% higher than a year ago and 3.1% higher than the five year average. Meat supplies in cold storage increased by about 1% from the previous month, compared to last year when freezer stocks declined 3%. (full details on p.3)

Pork: The report will likely be viewed as bearish for pork prices in the near term. Almost the entire increase in meat cold storage supplies was due to more pork going into freezers. The total pork inventory was reported to be 580.8 million pounds, 31.1% more than a year ago. Inventories of a number of items remain particularly heavy. Inventories of pork loins were 32.6 million pounds, 44% higher than a year ago. The sharp increase in hog slaughter and seasonally slower demand for pork loins at the end of August likely combined to push more product into freezers, which will tend to weigh on prices at least into the end of the year. Ham inventories were reported to be 195.0 million pounds, 30.2% higher than a year ago and 32.7% higher than the five year average. Ham stocks normally increase by 6-10% from July. This year, they increased by 24% from the previous month and will likely be even higher at the end of September given two slaughter weeks that are in the top five largest ever.

Total beef in cold storage was 429.8 million pounds, 0.3% more than a year ago. Boneless beef stocks were 368.0 million pounds, 1.4% higher than a year ago while beef cut inventories were 61.7 million pounds, 6.2% lower than a year ago. Total broiler supplies in freezers were 655.3 million pounds, 5.6% lower than a year ago.