US cattle on feed – potential impacts for beef prices

21 December 2015

The very volatile nature of the US cattle futures market over the last few months appears to have had an impact on the trading activity of the physical sector. The total number of cattle on feed as at 1 December was 10.8 million head, virtually steady with last year, but there was an 11% decline in the number of cattle placed in feedlots in November (USDA Cattle On Feed report).

The large drop in placements through November suggests there will be fewer cattle ready for slaughter in late spring, which is when beef demand tends to start increasing for the US grilling season. This, on its own, points towards higher beef prices again within the next six months.

The present position of the feedlot industry in the US, however, is regarded has very “uncurrent” at present, meaning that there are large numbers of cattle ready for marketing. This suggests large numbers of fed cattle still to come to market over the next two months, keeping downward pressure on beef prices during that period.

The feedlot figures for one month should be noted, but do not set a trend on their own. There may be large numbers of cattle being backgrounded that will be placed in feedlots through December and January, which would go some way to reversing the supply and price expectations for the US spring noted above. At present, however, the outlook to mid-2016 is looking more positive than over the last two to three months.

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