Cattle on Feed report surprises cancel out

Markets
Mar 1, 2013

The most recent Cattle on Feed (COF) report was released Friday, Feb. 22. It detailed the number of cattle on feed in feedlots with a 1,000-head or greater capacity as of Feb. 1 and the number of cattle placed on feed and marketed from such feedlots during the month of January. Overall, the report is being called neutral to slightly bearish on account of the higher than expected placements, though these were also offset by higher than expected marketings. Both of these numbers were higher than the same time last year.

As of Feb. 1, there were 11.07 million head of cattle on feed in the nation’s tracked feedlots. This was a 6.2 percent decline in the onfeed population compared to last year’s February population of 11.81 million head. This number was exactly in line with the average of pre-report industry estimates.

All of the large cattle-feeding states—Colorado, Kansas, Nebraska and Texas—saw year-to-year decreases in the number of cattle on feed on the first of the month. Colorado saw the largest percentile decrease at down 11 percent with 1.01 million head on feed compared to last year’s 1.14 million head. Texas declined 10 percent, down to 2.62 million head versus 2.9 million head. Kansas dropped 5 percent with 2.11 million head, and Nebraska lost 4 percent of its on-feed population with 2.47 million head.

The only reported state which saw on-feed populations larger this Feb. 1 versus last year’s was Washington, with 234,000 head on feed, up 3 percent from last year.

Placements of cattle on feed during January came as a bit of a surprise. Compared to pre-report industry expectations of placements being up by 0.3 percent, actual placements were up 1.6 percent at 1.88 million head placed. It is from this detail that the report has been called slightly bearish by some.

“The average of pre-report analysts’ estimates was for just a slight increase,” reported Tim Petry, Livestock Economist for the North Dakota State University Extension Service.

“About half of the analysts expected smaller placements with the other half expecting larger placements up to 4 percent above last year. The variations in placement expectations somewhat coincided with actual state-by-state variations.”

Most of the big cattle-feeding states saw steady or higher placements during January. Nebraska placements were up 10 percent at 475,000 head placed, and Kansas saw a 5 percent increase in its January placements with 430,000 head placed. Colorado remained steady with January 2012 with 190,000 head placed. Texas was the only one of the big cattle-feeding states which saw a decrease in placements, down 2 percent with 390,000 head placed compared to last year’s 400,000 head.

Placement distribution by weights told an interesting tale, though one that has been told in recent COF reports. More cattle in the heavier classes were placed this January than last, and placement of lighter animals decreased. Cattle under 600 pounds were placed at the same level as last year—445,000 head—but cattle between 600-699 pounds were down 8.1 percent at 395,000 head. Cattle between 700-799 pounds were placed 1.9 percent more than last year, with 535,000 head placed. And cattle weighing 800 pounds or more saw the biggest placement increases, up 12.1 percent with 501,000 head compared to 447,000 head.

To counteract the effects of year-to-year increases in placements which outstripped expectations, marketing of cattle during January was up 5.6 percent this year with 1.92 million head, compared to last year’s 1.82 million head. This detail has been spurring some to call the report neutral rather than bearish.

“The placement number came in a little above prereport expectations, but so was the marketing [number] so I think they kind of cancel each other,” said Troy Vetterkind of Vetterkind Cattle Brokerage. “We continue to market more cattle than we are placing so in the long run that is supportive to the market.”

Pre-report estimates of marketings projected a 4.7 percent increase, making the actual marketings higher than anticipated. However, according to Petry, the additional slaughter day in January 2013 versus 2012 rendered the relative increase in marketings “up less than 1 percent.”

Colorado was the only one of the big four cattle-feeding states which saw a decline in January marketings. Colorado marketed 8 percent fewer cattle at 175,000 head versus 190,000 head last January. Kansas’ marketing levels remained steady with last year at 415,000 head marketed in January. Texas’ January 2013 marketings, at 465,000 head, were 12 percent higher than in 2012. Nebraska also saw an increase in marketings, to the tune of 19 percent with 470,000 head marketed.

Cold Storage

USDA also released the monthly Cold Storage report on Friday, Feb. 22, detailing stores of meat and poultry in all stocks and warehouses as of Jan. 31. Total meat and poultry (beef, pork, veal, lamb/mutton, chicken, turkey and duck) in all warehouses increased 6.7 percent in January 2013 compared to January 2012. The advances came largely from increased chicken and turkey. Beef in cold storage actually declined, both in actual poundage and representation.

Beef in cold storage as of Jan. 31, 2013, stood at 484 million pounds (mp). This was down from 485.06 mp of beef in cold storage the same time last year. That said, this level is still above the five-year average for this time of year. The representation of stores of beef verses other proteins in cold storage also diminished. While beef represented 44.4 percent of red meat in cold storage in January 2012, and 24.2 percent of all meat, this most recent report shows its representation in the storehouses has dropped to 43.5 percent and 22.7 percent, respectively.

Pork’s poundage and representation in the red meat in cold storage increased year to year, but decreased its representation across overall meat in cold storage. Compared to January 2012, the most recent report pegged pork stores at 605.27 mp, up 3 percent. Its portion of red meat in cold storage jumped from 53.6 percent to 54.4 percent, however, its overall representation dropped from 29.3 percent to 28.4 percent.

“Normally pork inventories increase into January as buyers start putting product away for Easter,” Steve Meyer and Len Steiner of CME’s Daily Livestock Report reminded. “The pace of inventory build was near five year average levels.”

Poultry, and specifically turkey, saw the largest share increase in terms of the overall meat in cold storage. Total poultry in cold storage as of Jan. 31 went from 907.68 mp in 2012 to 1.02 billion pounds in 2013, a 12 percent increase. Of that, turkey stocks went from 297.74 mp to 361.84 mp, a 22 percent increase. Turkey went from representing 32.8 percent of all poultry stocks and 14.9 percent of all meat stocks in cold storage in January of 2012, to representing 35.4 percent of poultry and 17 percent of all meat this year. — Kerry Halladay, WLJ Editor

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