When looking at how the cattle contracts are trading throughout Jan. 24, traders may have gasped in shock about Friday's Cattle on Feed (COF) report.
In case you missed it, on Friday's COF report the market was caught off guard by the 6% year-over-year jump in placements. Analysts anticipated that placement numbers would be anywhere from steady to 4.7% higher than a year ago, but 6% wasn't on their radar.
So, upon hearing that placements in December jumped 6% to total 1.96 million head -- the highest they had ever been for December since the report began in 1996 -- sweat likely began to run down everyone's neck! However, let me remind you that emotional reactions are the absolute last thing that our market needs.
Before you jump on the fear bandwagon, think about what other options producers had with their feeders. Wheat fields didn't make, hay prices are outrageous and there's very little winter grass to be grazed, as producers battled a devastating drought. So where else were these feeders supposed to go? The last option that feeder buyers had with these cattle was to put them in feedlots and grow them that way.
Some cattlemen are worried that these heavier placements could hinder the market from rallying this spring, but fear not, as the market saw lighter weight feeders hit the bunks. During December, placements of cattle and calves weighing less than 600 pounds were 510,000 head, 600-699 pounds were 470,000 head, 700-799 pounds were 450,000 head, 800-899 pounds were 333,000 head, 900-999 pounds were 105,000 head and 1,000 pounds and greater were 95,000 head.
Remember to closely analyze the data before you react to a market headline; Friday's COF report is a perfect example of the need to better understand report's full context verses its simple headline. If fear is still causing anxiousness, be patient; on Jan. 31, the new Cattle Inventory report will be released and it's likely that it will share bullish news for the cattle market.
If you're making plans to attend the National Cattlemen's Beef Association's convention next week in Houston, plan to stop by the DTN/Progressive Farmer booth, as I'll be at NCBA as well! I'd love to opportunity to meet you and to chat about the cattle market.
ShayLe Stewart can be reached at ShayLe.Stewart@dtn.com
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