Source:  Rita Jane Gabbett, MEATINGPLACE.COM, 2/22/10

USDA's monthly Cattle on Feed report showed that on Feb. 1 there were more cattle on feed, more cattle placed on feed and more cattle marketed than analysts had anticipated.

The report, issued Friday afternoon, showed cattle placed on feed fell by 1.8 percent from a year ago, compared to a consensus of analysts polled by Dow Jones expecting a 4.9 percent drop. Total cattle on feed Feb. 1 fell by 2.6 percent, while analysts were expecting a 3.1 percent drop. And the number of cattle marketed rose by 2.1 percent, while analysts were expecting only a 0.9 percent increase.

"This suggests greater supply than previously anticipated and thus is marginally positive for beef packers such as Tyson (Foods) which as a general rule benefit from lower input costs," J.P. Morgan analyst Ken Goldman wrote in a note to investors.

Placements by weight class came in very close to last year, noted the CME's Daily Livestock Report, adding, "The similarity of those numbers simply suggests placement weights will not cause either the timing of marketings or market weights to differ much from historic norms."

Feedlot consolidation

The DLR also noted USDA's estimate of total U.S. feedlot capacity increased from last year, while capacity utilization on Feb. 1 stood at 82 percent, down 1 percent from a year ago.

"The low capacity utilization rate suggests that further consolidation will occur in (the) coming year," the DLR predicted. "Profit margins are not likely to ever stay good for long with that much excess capacity."

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