Placements down, called friendly to prices
The most recent Cattle on Feed (COF) report was released Friday, Nov. 16 covering cattle on feed in feedlots with at least a 1,000-head capacity as of Nov. 1 as well as cattle placed on feed and marketed during the month of October. Overall, on-feed numbers were down 5 percent compared to last year, placements were down 13 percent, and marketings were up 3 percent. There were two additional marketing days in this year’s October compared to last year. The report was in line with pre-report estimates and called friendly to cattle prices for the first half of next year.
The number of cattle on feed as of Nov. 1 was down 5 percent at 11.24 million head compared to last year’s 11.98 million head. This number was in keeping with pre-report industry predictions, which anticipated on-feed numbers to be down 5.4 percent. On a month-to-month comparison, cattle on feed as of Nov. 1 were up 3 percent compared to Oct. 1’s 10.99 million.
This on-feed number is the lowest it has been on a year-to-year basis since 2009, and is 1.7 percent below the five-year average for Nov. 1 numbers. A good deal of the losses came from a shift in on-feed populations; while northwestern and Corn Belt states saw year-to-year increases, Southern Plains states saw decreases.
Most all of the major cattle feeding states saw a decline in their Nov. 1 on-feed numbers. Of the main four—Colorado, Kansas, Nebraska and Texas—only Nebraska held steady with last year at 2.48 million head on feed. Colorado, Kansas and Texas saw declines of 10 percent (at 1.03 million head), 7 percent (at 2.22 million head), and 11 percent (at 2.67 million head), respectively.
Compared to on-feed numbers from Oct. 1, all of the big feeding states looked better. Colorado was up 3 percent and Nebraska was up 6 percent. Both Kansas and Texas held steady on Nov. 1 compared to Oct. 1.
Of the smaller cattle-feeding states, Idaho saw the biggest year-to-year increase of cattle on feed as of Nov. 1—up 7 percent at 240,000 head on feed—and Oklahoma saw the largest year-to-year losses—down 12 percent at 345,000 head.
Placements were down 13 percent (or 12.5 without rounding) for the month of October. This was neatly in line with pre-report industry predictions of placements down anywhere from 12.7 to 13.2 percent, though a bit higher. This estimate was called aggressive in light of the two additional marketing days.
Compared to the five-year average for October placements, this year’s numbers are down 13.7 percent. It is also worthy to note this October’s placement levels are the lowest recorded since 1996 when the data was first collected.
All of the four major cattle feeding states saw double-digit declines in their number of cattle placed on feed during October of this year versus last. Nebraska’s losses were the lowest at down 11 percent, with 590,000 head placed this October compared to 665,000 head last October.
Kansas shed 14 percent of its October placements compared to last year at 380,000 head, and Colorado lost 15 percent at 195,000 head placed versus 230,000 head last October. Texas saw the steepest decline at down 20 percent with only 450,000 head compared to last year’s 560,000 head placed.
Of the smaller cattle-feeding states, Arizona posted the biggest declines on a percentile basis, losing 41 percent with 19,000 head placed compared to 32,000 head last year. Alternatively, California saw the biggest increases of the small-feeding states, up 15 percent with 62,000 head placed in October of this year.
On a month-to-month basis, the big cattle-feeding states were mixed. Colorado and Texas saw declines in October placements versus September placements—down 13 and 6 percent, respectively— while Kansas and Nebraska posted month-to-month gains of 1 and 26 percent, respectively.
Though placements of all weight groups were down in October, the trend clearly favored heavyweight cattle against lightweight cattle. Placements of lightweights—feeders weighing under 600 pounds—were down 19 percent, from 840,000 head last year to 680,000 head this year. Cattle weighing between 600-699 pounds were down 14 percent at 505,000 head compared to last year’s 590,000 head.
The next weight class of cattle—animals weighing between 700-799 pounds— saw placements of 435,000, down 11 percent from last year’s 487,000 head. The heaviest cattle, those weighing 800 pounds or more, only saw a 3 percent decrease in October placements compared to last year at 560,000 head placed versus 575,000 head last year.
This shift away from placing lighter animals reflects the relatively high cost of feed being faced in recent months.
“The rapid decline in placements implies a notable reduction in the number of cattle available for marketing by Q2 for 2013, the time when demand for grilling season hits its peak,” noted CME analysts.
“The current pace of placements is consistent with the forecast for a notable decline (-5 percent or so) in cattle slaughter in Q1 and likely Q2 of 2013. The expectation is for placements to continue to decline in the next two to three months as feedlots struggle with margins.”
Decreased availability during peak grilling periods next year has the makings of record high prices paid for cattle. This will be tempered by feed costs and both feedlots and packers trying to mitigate losses from decreased capacity, but should be beneficial to anyone selling animals to cattle feeders.
The U.S. isn’t the only country facing this issue. Canada has also seen a decrease in placements into its feedlots as reported in its monthly cattle survey. In its Alberta and Saskatchewan provinces (the areas measured by its monthly cattle report), Canada saw a 22.4 percent decline in October placements, representing 71,000 fewer head.
“In both countries, those declines reflect smaller calf crops during the last few years and red ink for cattle feeders driven by record-high feedstuff costs,” according to a Livestock Marketing Information Center report.
Marketings of cattle during the month of October were up 3 percent (2.8 percent unrounded) compared to last year’s October marketings. Most of this can be attributed to the additional two marketing days in this October versus last year’s. This was again within close range of the pre-report industry expectations that marketings would be up 2.6-3 percent.
Three of the four big cattle-feeding states saw increases in their October marketings this year compared to last. Only Texas saw a decline with a 5 percent reduction in marketings at 440,000 head compared to 465,000 head.
Colorado, Kansas and Nebraska saw increases in October marketings of 3 percent (at 160,000 head), 7 percent (at 365,000 head) and 9 percent (at 425,000 head), respectively.
As with the other areas of the COF report, the smaller cattle-feeding states saw the widest range in their marketing numbers. Arizona had the largest percentile increase in its marketings—up 32 percent at 25,000 head—and Oklahoma saw the largest decrease at 14 percent with 54,000 head marketed this October versus last October’s 63,000 head.
“It is notable, however, that despite fewer cattle coming to market, overall beef production has held up relatively well, in large part because of big gains in cattle weights,” CME reminded. “Consider that for the period July through Sept., steer slaughter per marketing day was on average 1.5 percent lower than a year ago but beef production was up 0.3 percent (note this is adjusted on a per marketing day basis). Steer weights are currently running around 873 pounds per carcass, 2 percent higher than a year ago.
“This has helped offset some of the slaughter reductions and keep beef prices in check. The key risk to the market is if/ when carcass weight gains slow down. Winter weather is always a wild card, more so today when feedlot supplies are especially tight.”
Disappearance from feedlots was down in this October versus last by 20 percent. Compared to last year’s 98,000 head of disappearance in October, this year only saw 78,000 head moved from feedlots. This could have a lot to do with decreased grazing opportunities this year compared to last. The drought has left many pastures in poor condition and prospects for winter grazing slim in parts of the country which can often count on it. — Kerry Halladay, WLJ Editor