Source:  Rita Jane Gabbett, MEATINGPLACE.COM, 6/21/10

Cattle and calves on feed for the slaughter market in the United States for feedlots with capacity of 1,000 or more head totaled 10.5 million head on June 1, up 1 percent from a year ago, according to USDA's monthly Cattle on Feed report.

Placements in feedlots during May totaled 2.02 million, 23 percent above 2009.

"The recent surge in placements implies an increase in cattle availability later in the year," according to the CME Group's Daily Livestock Report. "For the moment, however, market-ready fed cattle supplies remain tight."

Oklahoma State University Extension Livestock Marketing Specialist Derrell Peel agreed. In an analysis of the USDA report, he noted the increase in cattle placements comes after months of feedlots reducing inventories. "After two months of larger placements, we will likely see slower placements until summer grazing cattle are available in the fall," he predicted.

Peel forecast continued seasonal pressure on fed cattle prices until Labor Day, with recovery expected in the fourth quarter, adding that just how low summer prices will go will depend on demand. Boxed beef demand dropped sharply last month, he noted, but appears to be stabilizing.

"If [beef demand] holds near current levels, there is not a lot of pressure for fed prices to drop much further," Peel said.

USDA reported marketings of fed cattle during May totaled 1.87 million, 4 percent below last May and the lowest for the month of May since the series began in 1996.

The DLR suggested very high prices likely caused packers to be less aggressive in trying to secure cattle, especially with beef sales slowing in May and sparse June delivery orders.

J.P. Morgan analyst Ken Goldman called the report "neutral" for packers such as Tyson Foods. "Though the increase in cattle on feed was, all else equal, good for packers such as Tyson (because more supply equals lower costs) we think it already was priced into the stock," he wrote in a note to investors.

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