Cattle on feed up, marketings down

Jul 27, 2012

July 20 saw an unusual cosmic alignment in the world of USDA reports; the July Cattle on Feed (COF) report, the Mid-Year Cattle Inventory report, and the monthly Cold Storage report all came out on the same day. The first two are addressed in this article, while the Cold Storage report coverage can be found elsewhere in today’s Western Livestock Journal.

Cattle on Feed

The July COF report showed that cattle on feed as of July 1, 2012, were up while marketings for June 2012 were down relative to 2011. The report also showed placements down, but analysts explain that, when the one less business day for June 2012 is considered, placements were modestly up. The numbers were very close to pre-report estimates.

Cattle on feed in feedlots with a 1,000-head or greater capacity as of July 1 stood at 10.71 million, up 3 percent from July 2011’s level of 10.43 million. This is down 3 percent from last month’s 11.08 million head on feed.

Different growth rates between cattle on feed in larger-capacity feedlots versus total head on feed—including feedlots above and below 1,000-head capacity—drew the attention of CME analysts.

“Note that the inventory of cattle in all feed yards [from the cattle inventory report] was up only 0.8 percent versus last year indicating a growth in the share of cattle on feed held by the larger lots. It also supports the continuation of lower steer/heifer slaughter relative to COF report inventories.”

The big cattle-feeding states of Colorado, Kansas, Nebraska and Texas saw an aggregated increase of cattle on feed as of July 1. In creases in cattle on feed in Kansas and Nebraska offset the declines in on-feed numbers seen in Colorado and Texas. All states, with the exception of Oklahoma, which remained steady with June, saw month-tomonth cattle on feed decreases.

Nebraska saw the biggest year-to-year percentage increase of cattle on feed of any of the reported states and big cattle feeding states. July 1 saw 2.27 million cattle on feed in Nebraska’s feedlots, up 12 percent from last year’s 2.02 million head. Of the big feeding states, Kansas saw the only other increase—1 percent— with 2.05 million head on feed versus last year’s 2.03 million.

The year-to-year number of cattle on feed dropped modestly in Colorado and Texas. Colorado’s July 1 cattle on feed population was 970,000 head, down 3 percent from last year’s 1 million head. Texas’ feedlots shed only 1 percent of onfeed cattle, from 2.69 million in 2011 to 2.67 million this year.

Aside from the aforementioned Nebraska, Washington and the aggregated onfeed numbers of other states led the way in percentage increases for July 1. Washington’s on-feed numbers for July 1 jumped 9 percent, from 192,000 head on feed in 2011 to 210,000 head in 2012. The combined results of other states not reported on individually increased 14 percent, from 379,000 head in 2011 to 431,000 head this year.

The biggest percentage declines in cattle on feed numbers were seen in Oklahoma, Idaho and the aforementioned Colorado. Oklahoma saw a year-to-year on-feed decline of 30,000 head from 2011’s 350,000 head on feed, a 9 percent drop. Idaho saw the next largest on-feed drop at 7 percent, from 215,000 head in 2011 to 200,000 head on feed this year.

On its face, placements were down 2 percent in June 2012 compared to 2011— from 1.7 to 1.66 million—according to the report. However, June 2012 had one less business day than did June 2011, meaning the placement data cannot be taken at face value. Darrell Peel of Oklahoma State University’s Extension said that, with the one less day this year, the placement numbers should be 2.8 percent above last year’s.

Of the big cattle-feeding states, Nebraska and Colorado were up for June 2012 placements, Kansas was steady with 2011, and only Texas declined in placement numbers.

Nebraska’s placements during June 2012 climbed 24 percent versus last year’s placements, at 385,000 head placed versus 310,000. Colorado’s 2012 placements jumped by 20,000 head—19 percent—beyond 2011’s placements of 105,000 head. As mentioned, Kansas’ June placements remained steady at 390,000 head.

Texas saw a 16 percent decline in June placements, down to 420,000 head placed in 2012 versus 500,000 head in 2011. All of the big feeding states saw a month-tomonth decline in placements with Colorado seeing the largest loss at 31 percent, down from May’s 180,000 head placed on feed.

Among the various weight categories, placement of heavy-weights was up significantly, placement of calves was steady with last year, and the middle-weight categories were down in placements.

Heavy-weight cattle— those weighing 800 pounds (lbs.) or more—were placed 14 percent more in June 2012 than in June 2011, from 435,000 head to 494,000 head. All states reported saw this trend of more heavy cattle placed on feed. Much of this trend is likely due to the pressure to cull adult animals from the herd. Cows and bulls on feed as of July 1 made up 0.005 percent of the total on-feed population, up 37 percent at 56,000 head from last year’s 41,000 head when they represented 0.004 percent of the on-feed population.

June 2012 placement of calves—animals weighing less than 600 lbs.—were steady with last year at 460,000 head. This wash came from modest calf placement increases in Colorado, Kansas and Nebraska, and significant declines in Texas’ calf placement.

“Placements of cattle less than 600 pounds was equal to last year’s drought-enhanced level and suggests more drought-forced placements this year,” said Peel of the situation.

Placement of middleweight cattle was down. The number of lighter middleweight cattle—animals weighing 600-699 lbs.— dropped 16 percent, from 380,000 head placed last year to this year’s placement of 320,000 head placed in June. Heavier middleweight cattle—animals weighing 700-799 lbs.—only saw a 7 percent decline, down 30,000 head from June 2011’s 420,000 head placed in June.

Drought conditions between this year and last and what it means for placements drew CME’s attention.

“Placements in June were 2 percent lower than last year’s drought-enhanced level. Of course the big drought-driven wave came in July last year. Will it do so again? Conditions in the Southwest are much better this year but those elsewhere are worse. And who wants to place cattle and feed them $8 corn? It’s not a very attractive choice this year.”

Overall, marketings were down 6 percent in June 2012, from 2.09 million marketed last year to this year’s 1.97 million head marketed.

Marketings were down considerably in most of the big cattle feeding states. Some noteworthy marketing gains in some of the smaller feeding/processing states were not enough to stem the downward flow.

While Nebraska held steady with its 2011 June marketings at 465,000 head, Texas and Kansas both saw double-digit percentage losses. Texas’ numbers dipped 11 percent, marketing 60,000 head fewer in 2012 at a total of 500,000 head compared to 2011. Kansas marketed 10 percent fewer cattle in 2012, down to 415,000 from 2011’s 460,000 head. Colorado also dropped in marketings, but only 3 percent—from 175,000 head marketed in June last year versus 170,000 marketed this year.

Washington and Arizona saw some decent percentage increases in their marketings at 15 and 11 percent, respectively. Despite the overall marketing numbers gains, both states marketed relatively few cattle at 45,000 and 30,000 head, respectively.

Cattle Inventory

USDA’s Cattle Inventory report showed the national cattle herd down in almost all categories with the best figures reported being steady. Overall cattle and calves—including beef and dairy animals—in the U.S. as of July 1 stood at 97.8 million head, a 2 percent decline from July 1, 2011. This number was lower than anticipated by prereport estimates.

A decline in the beef cow herd—down 900,000 head from 40.6 million in 2011— led the way in the surprisingly low results.

“The beef cow herd continued to decline in the face of limited pastures and, now, higher feed costs,” commented CME regarding the numbers. “The 3 percent fall from July 2011 was 0.8 percent larger than expected and the 39.7 million beef cows on U.S. farms and ranches is the lowest number ever for the July report, which dates back to 1973.

“And there is no help on the way as the number of beef heifers being retained was equal to last year’s very low 4.2 million head and sharply lower than analysts’ expectations.”

While heifers 500 lbs. and over retained as replacements have remained steady with last year, the paltry retention rate will not reverse the decline in the cow herd. The feeder cattle supply—non-breeding cattle outside of feedlots—stood at 37.5 million head, down 3 percent from 2011’s numbers.

Finally, the estimated calf crop for the year came in at 34.5 million, 2 percent below last year’s numbers of 35.3 million. Not only is this estimate well below analysts’ expectations, it would—if accurate—prove to be the smallest calf crop in 70 years. USDA estimates that roughly 73 percent of the 2012 calf crop has already been born while the remaining 27 percent will be calved between July 1 and Dec. 31, 2012.

Though this drop in cattle herd inventories is worrisome, some short-term good will likely come of it for some. According to Andrew Gottschalk of Hedger’s Edge, “This drop in supplies only reinforces the long term “bullish” supply outlook for feeders and calves.” — Kerry Halladay, WLJ Editor