Cattle on Feed report results lower than expected

Markets
Sep 28, 2012
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The most recent Cattle on Feed and Cold Storage reports came out Friday afternoon, Sept. 21. All numbers reported for the Cattle on Feed report were down from what the industry anticipated. This could mean supplies are and will be tighter than anticipated. The Cold Storage report showed pounds of beef in cold storage in public warehouses were down, and beef’s representation in terms of all meat was steady with previous years.

USDA’s most recent Cattle on Feed report—released Sept. 21 covering cattle on feed as of Sept. 1 and August placements and marketings—surprised all pre-report estimates. Namely, the actual USDA estimates were lower, in some cases significantly lower, than expected.

Cattle on feed in feedlots feeding 1,000 or more head as of Sept. 1 was estimated at 10.64 million head, down 1 percent from last year’s Sept. 1 on-feed count of 10.7 million head. This year’s Sept. 1 head count was only slightly down from last month, which saw 10.66 million head on feed. Pre-report estimates put the number of cattle on feed steady with the same time last year.

State-specific on-feed numbers show most states decreased compared to Sept. 1 last year. In the big cattle-feeding states of Colorado, Kansas, Nebraska and Texas, only Nebraska saw a yearto-year increase of cattle on feed as of Sept. 1. With 2.24 million head of cattle on feed, Nebraska’s numbers were up 11 percent from last year.

Colorado, Kansas and Texas, however, saw on-feed decreases.

Colorado, with 930,000 head on feed as of Sept. 1, was down 6 percent from the same time last year. Kansas was down only 2 percent compared to last year with 2.17 million head on feed. And Texas was down 9 percent at 2.62 million head on feed.

In the month-to-month scope, the big cattle-feeding states were steady to lower on Sept. 1 compared to Aug. 1. Colorado and Texas were both down 1 percent from their Aug. 1 on-feed numbers while Kansas and Nebraska were steady with August’s numbers.

Overall placements in August were down 11 percent compared to last year. Pre-report estimates expected placement numbers to be down compared to last year, but only down 7 percent. Though placement increases were seen in smaller feeding states, these increases were insufficient to offset the placement losses seen in the big cattle-feeding states.

State-level placement numbers were wildly varied. In the big cattle-feeding states, year-to-year placement numbers were mostly down. Colorado, with 190,000 head placed in August, was down 17 percent from last year’s August placement numbers. Kansas saw the same percentage decrease from last year with its 430,000 head placed. With 495,000 head placed, Texas saw the biggest year-to-year decline at down 20 percent from last year.

In terms of year-to-year decreases of placement numbers for August in the smaller states, South Dakota saw the larges losses.

Compared to the 45,000 head placed last year, this year’s 34,000 head placed was a 24 percent decrease.

Nebraska was the only one of the big cattle-feeding states to see a year-to-year increase. With 470,000 head of cattle placed in August, it gained 6 percent over August 2011. Smaller states to see year-to-year increases were California with 63,000 head placed—up 13 percent from last year—and Idaho with 53,000 head placed, an increase of 23 percent compared to 2011.

In the month-to-month spectrum of placement numbers, most states saw increases, which is in keeping with placement trends.

Kansas was the only large cattle-feeding state to see month-to-month losses, down 20 percent from July’s placements. The other large cattle-feeding states saw placement increases as follows: Colorado up 23 percent, Nebraska up 15 percent, and Texas up 4 percent.

Smaller feeding states saw some particularly large increases in their Augustplaced cattle numbers. Despite seeing the largest year-to-year declines in August placements, South Dakota saw the largest monthto-month increases, with August placements up 70 percent compared to July placements.

Placements by weight categories in August shifted significantly in some places compared to last year. The largest drop in placements came from the lightweight (under 600 pounds) category, going from 715,000 head placed in August 2011 to 482,000 head placed this year.

Other weight categories remained relatively steady with only slight decrease overall. The 600-699 pound category gained 20,000 head at 385,000 head placed. The 700-799 pound category shed a mere 1,000 head at 475,000 head placed. And the placement of cattle at or over 800 pounds lost 30,000 at 660,000 head placed.

CME pointed out a number of details to keep in mind when looking at the recent placement data.

“The reduction in placements is in part due to the lack of feeder cattle availability (smaller calf crop in 2012). Also, comparisons to last year are somewhat skewed by the drought impacts in 2011. Last year, significant drought conditions in the Southern Plains pushed a lot of lightweight calves onto feedlots. While this year producers also struggled with drought conditions, the situation in a number of areas was better than a year ago.”

Grain prices also had a lot to do with it, according to CME. Given the price of grain and the necessity of lighter animals to be on feed longer, the willingness of cattle feeders to buy these relatively expensive animals was lessened.

Marketings during August were down 5 percent compared to the same time last year and were below pre-report estimates of down 1.5 percent. At 1.96 million head marketed, August’s marketing numbers were 2 percent above July’s marketings of 1.91 million head.

Marketings were mostly down across the large cattle-feeding states on a yearto-year basis. Nebraska was the only of the four to see year-on-year marketing gains, going from 400,000 head marketed in August last year to 445,000 head marketed in August this year, an 11 percent gain.

Colorado marketed 5 percent fewer cattle during August this year than last at 195,000 head. Kansas, with 410,000 head marketed in August, saw a 14 percent decrease. And Texas dipped 6 percent compared to last year with its 510,000 head marketed.

The story was the complete opposite with monthly comparisons. Of the four big states, only one—Kansas, at down 1 percent—saw marketings lower in August than in July. Colorado, Nebraska and Texas, on the other hand, had higher August marketing numbers than in July, at up 8 percent, 1 percent and 7 percent, respectively.

“The marketings number was somewhat disappointing but understandable given the tug of war between feedlots and packers, both feeling significant margin pressure,” read the CME response to the Cattle on Feed report.

Over the past few weeks to a month, packers have lost the regular, though thin, profits being made per head achieved a while ago. Last week, packers were regularly losing around $25 a head. Cattle feeders, of course, haven’t seen black ink for some time.

Cold storage

At 426 million pounds (mp), beef in cold storage in public warehouses as of Aug. 31 went down compared to both last month (452 mp) and the same time last year (422 mp). As far as representation, beef made up 44 percent of the total red meat in cold storage (including pork, veal, lamb and mutton), and 21 percent of the overall meat in cold storage (the aforementioned plus total poultry).

Beef’s representation in the overall meat cold storage numbers has been staying fairly consistent. The Aug. 31 report for 2011 showed beef as 20 percent of all stored meat in public warehouses. For both August 2009 and 2010, beef represented 21 percent of the cold-stored meat.

Pork in cold storage as of Aug. 31 stood at 508 mp, representing 53 percent of the total red meat in cold storage and 25 percent of total meat stored. This percentage has grown since the same time last year where 443 mp of stored pork represented 21 percent of total meat stores. August’s cold storage figures are down from the prior month’s 550 mp of pork. Poultry (broilers, turkeys and ducks) represented 53.5 percent of total meat in cold storage in public warehouses at 1.11 billion pounds.

Most of the Cold Storage interest lay in the growth of pork in storage. According to CME, the report was bearish for pork which was to blame for most of the 6 percent increase in overall meat in cold storage in public warehouses. — Kerry Halladay, WLJ Editor

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