Monthly Cattle on Feed: Comments and implications
Source: James Robb, Center Director, Livestock Marketing Information Center
Monthly Cattle on Feed reports by USDA’s National Agricultural Statistics Service provide valuable and timely market data, but those reports often need to be put into a larger context, especially when unusual situations are happening. Of course, severe drought in southern states last year had a significant impact on cattle placement patterns and therefore careful interpretation is still required of statistics like the, often referred to, number of cattle on-feed for 120 days or more. But, simultaneously with the drought another less apparent force came into play -- the U.S. cattle feeding industry has been going through some structural change.
Structural change has been indicated in the monthly Cattle on Feed reports for over a year. Fewer-and-fewer cattle are being fed in feedlots with a one-time capacity of less than 1000 head. Those farms often include cropping enterprises and have made adjustments caused by high crop prices and negative cattle feeding margins. USDA’s monthly Cattle on Feed report only includes feedlots with over 1000 head capacity and those feedlots represent an increasing proportion of U.S. cattle being fed. A result has been that the report can show inventory and marketing numbers above a year ago, but steer and heifer slaughter does not increase proportionally, in fact slaughter has often posted year-on-year declines. Expectations that “more market ready cattle are ahead” have tended not to materialize.
Now, let’s review the Cattle on Feed report released last Friday afternoon. For the first time in any month during the last two years the on-feed count was below a year ago. As of May 1, the year-on-year decline was 0.6% (65,000 head).
Marketings during April were larger than pre-report estimates (including those of the LMIC), as has often been the situation in recent months. Analysts expected marketings below a year ago (down about 1.5%), but producers reported to USDA numbers slightly above a year ago. Marketings in the report historically track rather well with steer and heifer slaughter, after making adjustments for the number of Canadian animals imported directly for harvest. In fact, USDA figures put steer and heifer slaughter for the month of April at 4.5% below 2011’s.
As expected, placements of cattle into feedlots were below a year ago during April, down 15%. The average of pre-report estimates indicated a 12% drop. The year-on-year decline was due to: 1) large numbers forced into feedlots last year because of drought; 2) huge red ink on feedlot closeouts and no opportunity in April to lock-in anything close to a breakeven sales price for purchased feeder cattle using risk-management tools; and 3) shrinking cattle supplies. Head placed in all weight categories were below a year ago, with the lightweight category (under 600-pound) down 20%.