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Cattle on Feed Preview                 07/24 15:25

By John Harrington
DTN Livestock Analyst

                    USDA     Average
                   Actual     Guess        Range
Cattle On Feed:
On Feed Jul 1                  98.0%     96.0-99.0%
Placed in June                 96.0%     92.0-103.5%
Marketed in June               98.0%     96.5-100.5%

In general, trade expectations for the July 1 Cattle on Feed report set to 
be released Friday afternoon at 2:00 p.m. CDT are generally positive, 
especially in terms of total on feed and feeder cattle placed in June.

Since June typically represents the first full month of grazing capacity 
in the cattle industry, it often sees the year's smallest monthly 
placement activity. Yet we're impressed by the low trade guess given the 
fact that early summer placement in 2013 totaled no more than 1.59 
million, 5% below both 2012 and the previous 3-year average.

Better pasture condition through the spring and early summer would clearly 
seem to support such anticipation. Barring any surprises, this news should 
start setting the stage for manageable fed supplies in the fourth quarter.

If there's a small chink in this report's bullish armor, it might be tied 
to the expected drop in June marketing. While some decrease makes sense 
given the recent pattern of smaller on feed totals, the real size of last 
month's decline could suggest that feedlots have lost a step or two in 
terms of being strictly current.

It needs to be stressed that June contained one additional business day 
than the same month last year. Adjusted for the additional marketing day, 
the marketing rate plunged nearly 7% below last year. Strictly speaking, 
such a shortfall seems excessive given the aggressive placement levels of 
January and March.

With fed prices soaring and feed costs sinking, there's been plenty of 
incentive for feedlot managers to hold cattle longer. Perhaps such a shift 
in strategy started in June.

Yet, having said all that, there's little evidence in the red-hot feedlot 
trade to seriously suggest that producers are suffering from a lack of 
bargaining power -- at least not yet.

In addition to the monthly on feed report, the USDA will also issue its 
semi-annual cattle inventory at the same time.  This was the herd count 
that got caught on the budget chopping block last year, so we haven't seen 
a midyear assessment since the summer of 2012.

Nevertheless, it will good to have the data series back.  Given how market 
prices and drought conditions have changed over the last 18 months, you 
can be sure that analysts and producers will be pouring over the numbers 
in search of meaningful clues of herd expansion.

Given the absence of last year's report, many are reluctant to make a 
guess. Our hunch is that the total herd count as of July 1 will be 100-
101% of the previous year, and the same probably goes for the total cow 
herd.  Interestingly, the report will also provide the first estimate of 
the 1014 calf crop.  Again, we would guess that numbers will be even to 1% 
greater than 2013.

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