Last Friday, the U.S. Department of Agriculture released the monthly cattle on feed report for the month of April. The report held no surprises; in fact, the actual U.S. Department of Agriculture numbers were unbelievably close to the average trade estimates.

The USDA said that the number of head on feed would be 95 percent of last year, confirming that near-term supplies of cattle would remain tight. The average trade estimate was 95.6 percent, so the tight on feed supplies was well expected by the industry.

Placements, according to the USDA, were 104 percent, or 4 percent, higher than one year ago. The average trade guess was 103.8 percent, nearly identical to the USDA figure. Feedlots continue to place cattle on feed due to the returning profitability of the cattle industry.

While front month supplies are tight, the larger placement figures should hit the market in the August to December timeframe and reverse the tight supply situation that is being witnesses by the industry through the first and second quarters of 2009.

Finally, the USDA announced the March marketing figure was 99 percent of last year, again nearly identical to the average trade guess of 99.2 percent.

With fewer cattle on feed compared to last year, it only stands to reason that there will be fewer supplies to market compared to last year.

As prices paid for fat live cattle have risen; marketing during April has also increased and should be reflected in next month’s USDA report.

Below is the text of the report released by the USDA.

Cattle and calves on feed for slaughter market in the United States, for feedlots with capacity of 1,000 or more head, totaled 11.2 million head on April 1. The inventory was 5 percent below April 1, 2008. The inventory included 6.98 million steers and steer calves. This group accounted for 63 percent of the total inventory. Heifers and heifer calves accounted for 4.12 million head, down 4 percent from 2008.

Placements in feedlots during March totaled 1.80 million, 4 percent above 2008. Net placements were 1.75 million head. During March, placements of cattle and calves included:

• weighing less than 600 pounds were 300,000,

• weighing 600-699 pounds were 340,000,

• weighing 700-799 pounds were 592,000, and

• weighing 800 pounds and greater were 570,000.

Marketing of fed cattle during March totaled 1.83 million, 1 percent below 2008.

Other disappearance totaled 50,000 during March, 21 percent below 2008. This is the lowest other disappearance for the month of March since the series began in 1996.

Corn analysis

Corn closed the week $.13 1/4 lower. The weekly export sales report showed net sales of 879,600 metric tons were down 17 percent from the previous week and 11 percent from the prior four-week average.

Increases were reported for Japan (303,100 MT, including 46,100 MT switched from unknown destinations), Mexico (124,400 MT), Venezuela (58,400 MT), unknown destinations (56,200 MT), South Korea (51,200 MT), Costa Rica (48,000 MT), Syria (46,700 MT, including 41,100 MT switched from unknown destinations), and Guatemala (41,100 MT).

Decreases were reported for Egypt (1,200 MT). Net sales of 149,800 MT for delivery in 2009/10 were for unknown destinations (116,000 MT) and the Dominican Republic (33,800 MT). For the marketing year, corn sales are 58 percent behind last year’s demand pace.

The USDA has now exported 1.374 billion bushels of corn compared to 2.160 bb last year. To reach the USDA forecast, the U.S. needs to export 15.5 million bushels each week.

Last week, the USDA announced a 232,000 million tons corn sale to an unknown destination. The upside for corn remains limited by large farmer inventories. Due to the fundamental fact that farmers generally have more corn to sell compared to soybeans, the upside potential for the old crop supplies are limited.

Planting progress should improve during the last two weeks of April, thereby pressuring new crop corn prices.

Soybeans analysis

Soybeans closed the week $.41 1/2 higher. The weekly export sales report showed net sales of 808,300 MT were up 87 percent from the previous week and double the prior four -week average. Increases were reported for China (405,800 MT, including 47,600 MT switched from unknown destinations), unknown destinations (138,900 MT), Egypt (99,400 MT), Malaysia (28,100 MT, including 27,000 MT switched from China), Syria (27,000 MT), and Mexico (22,500 MT). This year’s export pace remains well above last year’s pace as the U.S. now has export commitments for 1.115 bb compared to 1.035 bb a year ago. The U.S. only needs to average 6.7 mb to reach the USDA forecast.

Last week, the USDA announced a 275,000 mt soybean sale to an unknown destination, which will no doubt turn out to be China. Harvest in South America has reached 70 percent completed in Brazil and 22 percent in Argentina. I have been mentioning that new crop soybean values need to rally to attract lost acres to corn. The spread between corn and soybeans has recovered from a low of 1.97 to the current reading of 2.30 during the month of April. Soybeans are now at a price level were they could redeem some acres from corn. Producers need to recognize this possibility and become marketers on soybean strength over the next 45 days.

Brian Hoops is president and senior market analyst of Midwest Market Solutions Inc. Midwest Market Solutions is a full-service commodity brokerage and marketing advisory service, clearing through R.J. O’Brien.