The latest cattle on feed report showed that 11.6 million head of cattle were on feed as of February 1, 2018. This is the largest total since March of 2012. This is 848,000 more head of cattle than were on feed on the same date last year — a 7.9 percent increase.
The biggest surprise came (again) from the placements numbers. Pre-report expectations predicted placements to be about the same as during January of 2017. However, the report indicated a 4.4 percent or 87,000 head increase in the number of cattle placed during January 2018. Much of this increase again came from the Southern Plains region with Texas showing significant increases. However, the story is a bit more complicated this time around as the increases were also in heavier-weight cattle. These increases were seemingly bearish to traders on Monday as both Live Cattle and Feeder Cattle futures were lower.
There is certainly some shock factor to these numbers. Eight percent larger on anything is a big number. However, the story should not be taken as bearish as the title might suggest. Marketings were strong again – up 6.1 percent over last year and feedlots remain relatively current. The story is still about beef demand and its ability to pull cattle through feedlots at an efficient pace. However, these larger supplies will make it more difficult to see the same magnitude of a Spring rally that we saw last year. This is not shaping up to be a year when there will be a shortage of market-ready cattle during April and May.