Evening Report (VIP) -- January 24, 2014

January 24, 2014 09:06 AM

Cattle on Feed Report: slightly negative compared to expectations... All three categories in USDA's Cattle on Feed Report came in on the negative side of the pre-report guesses. With Placements nearly three percentage points above the average guess and Marketings just over three percentage points less than anticipated, USDA's Jan. 1 On Feed number came in one percentage point above expectations, but down 5% from year-ago. The "miss" was a modest 72,000 head compared to the average pre-report guess. Still, the Jan. 1 feedlot inventory is 600,000 less than year-ago.

Report details


Avg. Trade Guess


% of year-ago levels

On Feed











With Placements up 1% from year-ago despite tight U.S. calf supplies, it implies there are a greater number of Mexican and Canadian calves coming across the border as feedlots look to take advantage of cheaper feed costs and a strong cash cattle market outlook. A weight breakdown of animals moving into feedlots last month shows: lightweight placements down 2%, 6-weights up 1.2%; 7-weights up 3.2%; and heavyweight placements up 2.7% from year-ago.

We'll know more after next Friday's Cattle Inventory Report, but the bigger-than-expected placements could also be the result of an expanded dairy herd. If the "extra" calves being placed on feed are mostly black-and-white, we'll have more dairy beef coming to the market. However, most dairy-beef steers fall into the lightweight category, so it's really difficult to expect the higher-than-expected placements to be the result of a bigger supply of dairy feeders.

With all three categories on the negative side of the average pre-report guesses, this could lead to additional profit-taking in cattle futures Monday. But the big discount cattle futures hold to the cash market should limit selling unless traders are convinced a top is in place.


Former CRP acres available for 2014: 1.713 million... Nearly 1.713 million acres of land formerly enrolled in the Conservation Reserve Program (CRP) can be planted in the 2014 crop year, according to Farm Service Agency data. Currently, 25.559 million acres are enrolled in the program and there is no authority to enroll new CRP acres. The new farm bill will likely reduce the CRP acreage cap from 32 million to 24 million by FY 2018.

Expirations in 2014 won't drop the program under the expected 24-million acre threshold (new acres will be enrolled under new authority), but it won't take long for CRP acres to fall under the cap. The level of CRP acres has been on a downward trajectory since Sept. 30, 2007 when there were 36.771 million acres in the program. Get more details here.


Major Argentine peso devaluation... Corn and soybean futures faced pressure early today on fears the steepest devaluation of the Argentine peso since 2002 will force corn and soybeans that Argentine farmers are "hoarding" as a hedge against inflation onto the market. Our sources there, however, tell us uncertainty in the market will keep grain in storage until it can be sold and immediately converted into something they need, like new-crop inputs.

An Argentine Pro Farmer Member, farmer and grain trader tells us: "The currency controls are only lifted for individuals for the moment... when uncertainty arises farmers sit on what they have. It is very difficult to understand the dynamics of an inflationary movement, but older farmers have gone through many of these situations and dormant reflexes come into action -- sell what you owe and sell after you have the debt so inflation does not liquefy your money."


Record run for cattle futures... Pro Farmer Senior Market Analyst Brian Grete and Digital Managing Editor Julianne Johnston discuss the fundamentals behind the record run in the cattle market on this week's Pro Farmer Profit Briefing segment on AgDay TV. Choice beef values posted their first back-to-back days of price declines of the year this week, but have still risen 20% since the beginning of the year. Packers are enjoying profitable margins, which spurred record cash trade of $147 to $150 this week. Click here for more.

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