by Agrimoney.com
Has a matter of size trumped a numbers question?
Cattle futures staged a surprise rebound on Monday despite a barrage of apparently bearish data showing a bigger US herd than had been expected – with the revival attributed by some to potentially smaller animals.
Both feeder and live cattle opened weak in Chicago, running to traders' script after a key US Department of Agriculture report showed the US herd - while dropping this month by 1.1% to 100.0m head, its lowest on record - had not fallen as far as analysts had expected.
The market had forecast a decline of some 315,000-head more, to 99.7m animals.
The number of cattle in feedlots was especially strong, a separate report showed, lifted by placements which rose 4.0% last month – in contrast to the slide of 6.6% that traders had expected.
"The ongoing drought in the south west appears to have forced more cattle off the range" and into feedlots, Jon Michalscheck at Benson Quinn Commodities said.
'Somewhat bearish'The feedlot data were deemed especially bearish for nearer-term contracts, implying a jump late in the year in supplies of live cattle - fattened animals ready for slaughter.
"This ought to affect the October, December timespan," Mike Mawdsley at Market 1 said.
The inventory report echoed the dynamic in showing a calf crop of 35.5m animals, some 350,000 head higher than analyst estimates, implying a near-term boost to cattle numbers, but a beef cow herd which fell well short of expectations, indicating a diminished breeding herd ahead.
"In the short-term, the report could be construed as somewhat bearish for cattle prices," a report from Paragon Economics and Steiner Consulting said.
"The much larger [than expected] calf crop is bearish in the short term."
Heat stress
However, after a weak start, and poor sentiment in crop markets, both near and far-term futures in both live cattle and feeder cattle recovered most of their lost ground, to bring some lots back into positive territory in late deals.
"It is a little bit surprising. Futures could not stick it to the downside," Don Roose, president of broker US Commodities, said.
He attributed the resilience in part to prices in the cash market, which traded at $108 a hundredweight last week. "We do not know how this is going to do this week," Mr Roose said.
Furthermore, there was some evidence that weights may be coming down, limiting the impact of higher animal numbers in raising beef supplies.
Besides the impact of high corn prices in reducing feedlots' appetite for fattening cattle to the limit, Mr Roose noted a side effect of the heatwave in southern states home to one-third of the US herd.
"We spoke to one feedlot owner earlier who was wary of putting large cattle because of the risk in high temperatures.
"When you are moving a 1,400-1,500 pound steer in 105-degree [Fahrenheit] heat, that's going pretty stressful for the animal."
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