Cattle on Feed shows two stories. Tight Q4 supplies are ahead. However, front end numbers are a problem.

USDA's monthly Cattle on Feed report would be called net positive. For the extended period, later this year, bulls will be happy to note March placements were sharply lower than expected. USDA's monthly count showed 1.746 million head last month, -12.3% from last year. That is the lowest inflow in four years for March. It would be the second lowest inflow for March in 12 years. This was much under the -7.0% trade expectation (ALDL -5.3%). These numbers hit the market as fat cattle September - December. So our November - February inflows, which determine summer/fall fed cattle were -1.3%. And now we're seeing further evidence of the restart of supply tightening that will hit Q4.

USDA reported March marketings, movement of finished cattle out of feedlots, at 1.706 million. This was -13.7% from one year ago. Now, we will disclose there was a calendar mismatch this year vs. last. That explains a part of this seeming large shortfall. We will point out this was a little lower than the -11.9% trade expectation (ALDL -10.2%). This further adds to the “large front end supply” story we've discussed this week. With inflows and outflows calculated the April 1 On Feed was noted at +1.5% from last year. That was under the +2.1% trade estimate (ALDL +2.5%). Given that most in the trade are keenly focused on “later this year supply” we would suggest a higher start to futures on Monday.

We need to revisit the front end supply issue now that we have the report in hand. The finished cattle numbers we've been working through in recent weeks were placed from May - October. They were +0.8% from the prior year. But we had seven weeks of packer kill setbacks. On this seemingly neutral April 1 On Feed +1.5% estimate are two separate stories. The bearish part is that computed cattle in the feedlot for +120 days, a measure somewhat reflecting ready cattle, now comes to 4.950 million head. That would be +11.5% from one year ago. It is the largest computed number for this month in 16 years! We agree that this week's stable cash cattle trades look great. But given the size of the near term issue we hesitate to say any real low is in for futures.

‍