In the slew of events in recent weeks, market participants were expected to glance at last Friday's Cattle on Feed report and quickly forget about it given more complex matters were pressuring the industry. In the past two weeks, Tyson announced the closure of two more beef plants with the intent to sell another. Just this past Monday, Mexican cattle imports resumed. And the administration plans to increase imports of foreign beef product without TRQs for grinding. All seemed to pull the market's attention away from last Friday's Cattle on Feed report.

But it's imperative that we sit down, digest the information presented in last Friday's report and analyze the ramifications the data could have on the market moving forward.

For months now the Cattle on Feed report has been begging for attention, hoping to highlight the problem at hand and hopefully help some market participants gain clarity before trouble arises. But old habits die hard and the way the industry has become accustomed to analyzing the Cattle on Feed report is flat lazy. Anymore, all traders and some analysts do is see whether the pre-report estimates match the actual data. If actual data comes in steady or less than pre-report estimates, they deem it a bullish report.

But that's a problem. There's nothing bullish about seeing on-feed totals 2% higher than a year ago. And seeing a record number of cattle on feed with 180 days or more should scream trouble -- BIG TROUBLE. Even if placements were down 11% compared to a year ago.

The fact there are fewer placements in the market stems from a multi-decade low in the beef cow herd, the fact the border was closed to Mexican imports and the fact a large percentage of producers elected to market their calves early this year because of either drought or high prices paid. But choosing to have tunnel vision and only look at the 11% decline in placements and avoid the elephant in the room with on-feed totals up 2% and marketings down 7% is plumb negligent and will cause further pain in the future.

Truthfully, we are seeing the ramifications of this scenario play out before our eyes right now in the marketplace. Over the last month, fed cash cattle prices have declined and packers have been able to strategically build up inventory to keep the market from gaining momentum in the weeks to come. Given the entire industry knows front end supplies are only going to continue to grow more burdensome, packers are finally sighing in relief, knowing they're in the driver's seat likely through the year's end as an overabundance of front end supply works in their favor. And let's not forget to mention the severe decline the futures market has seen recently. On Tuesday afternoon the soon-to-expire August live cattle contract closed at $218.10 -- the lowest point the market has traded in over eight months. The September feeder cattle contracts closed at $319.27, which is also the lowest price the contract has traded at since last December.

The market has recently been under pressure for a number of different reasons -- plant closures, headline news from the President, and the border's slow reopening -- all of which were developments that came on their own accord. But the recent deterioration in the fed cash cattle complex and the likelihood prices could remain soft for the unforeseeable future as packers have regained leverage in the marketplace -- that was foreseeable. The Cattle on Feed reports have been laying the groundwork for that market scenario now for months.

It's imperative that market participants -- traders, analysts, producers and everyone in between -- choose to look at the data through a more critical lens and not simply compare the pre-report data to the actual USDA figures. There's too much at stake to be blind to what's in front of our own eyes.

ShayLe Stewart can be reached at ShayLe.Stewart@dtn.com

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