Feedlot placements up 15 percent

Jun 29, 2012

USDA’s National Agricultural Statistics Service released its latest monthly Cattle on Feed (COF) report on June 22. Cattle and calves on feed for slaughter market in the U.S. for feedlots with capacity of 1,000 or more head totaled 11.1 million head on June 1, 2012. The inventory was 2 percent above June 1, 2011. Analysts polled by Dow Jones on average expected a 7 percent increase in the June numbers.

Placements in feedlots during May totaled 2.09 million, 15 percent above 2011. Net placements were 1.99 million head. During May, placements of cattle and calves weighing less than 600 pounds were 520,000, 600-699 pounds were 365,000, 700-799 pounds were 530,000, and 800 pounds and greater were 672,000.

According to James Robb, director, Livestock Marketing Information Center, there are several factors that increased placements, including an increase due to lower than expected feedlot marketings. Marketings of fed cattle during May totaled 2.02 million, 1 percent above 2011.

“Placements of cattle into feedlots were above a year ago during May. Even though the year-over-year increase was large (up 15 percent), that was about what market analysts expected. Several factors contributed to that jump. The most important factor was a return to more normal placement patterns this year in the Southern Plains, compared to what happened last year. In 2011, placements occurred in months prior to May because of drought,” Robb said.

Robb pointed out several secondary factors that combined to significantly increase feedlot placements, including, in order of importance: 1) U.S. imports of feeder cattle were above a year ago (driven by on-going severe drought in Mexico and by high U.S. prices pulling cattle from Canada); 2) dryness precluding animals under 600 pounds going on summer grazing programs, which in much of the U.S. traditionally begins on May 1; 3) more cattle weighing over 800 pounds due to the availability of wheat grazeout in the Southern Plains and backgrounded cattle in the Central and Northern Plains (largely placed into Nebraska and Colorado feedlots); and 4) Holstein calves being placed into feedlots rather than harvested for veal.

The May data did come in smaller than analysts expected. With an extra day in 2012’s May, analyst, expected marketings to come in 5 percent above 2011’s, but instead remained around 1 percent.

“Averaging the marketings reported by feedlots to USDA over the last two months may paint the most realistic picture. Market analysts will be looking very closely at the marketings number in the next report from USDA to detect patterns,” Robb said.

The COF report has other disappearances totaled at 100,000 during May, 23 percent above 2011.

“Year-on-year increases in the number of cattle in feedlots suggest that feeders can be rather passive buyers of animals for the next two to three months. Additionally, the current financial status of many cattle feeders will greatly limit purchasing calves or yearlings that have little hope of making money. Last year, aggressive contracting

for cattle on western and High Plains ranches for late summer and fall delivery was widespread; it appears that a repeat this year is not likely,” Robb said.

“Forage conditions and corn prices will be the drivers of calf and yearling prices for the balance of 2012, neither of which has been supportive of calf or yearling prices during the last several weeks. As a result, this summer, prices of calves and yearlings could be more volatile than last year. Calf and yearling prices will remain above a year ago with just a little cooperation by Mother Nature. But, calf and yearling prices could easily drop to year ago levels if both national forage conditions and corn yield potential continue to deteriorate at June’s rate,” Robb added.

CME called it a “moderately bearish report, mostly for short term supplies.”

“Longer term, the cattle market still is facing an overall shortage of calves and ongoing beef cow liquidation all but assures tight cattle supplies into 2014,” according to CME reports.

USDA’s Cold Storage Report was also released June 22.

“There was broad expectation coming into the report that meat protein supplies would show a big increase from a year ago,” CME reported.

Total beef, pork and poultry supplies as of May 31 were 2.282 billion pounds, 3.6 percent higher than a year ago and 7.8 percent higher than the five year average. Total pork in cold storage at 636.1 million pounds was 16 percent higher than a year ago.

Total red meat supplies in freezers were down 4 percent from the previous month but up 14 percent from last year. Total pounds of beef in freezers were down 4 percent from the previous month but up 11 percent from last year. —

Traci Eatherton, WLJ Editor