Lower placements surprise industry

Markets
Apr 1, 2013
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The most recent Cattle on Feed report was released Friday, March 22 by USDA. The report covered the number of cattle on feed as of March 1 in feedlots with a 1,000-head or greater capacity, as well as the number placed on feed in, and marketed from, such feedlots during the course of February. Pre-report industry estimates for the report’s results were fairly dead-on for cattle on feed and marketing numbers, but placements were a surprise, down 13.5 percent compared to the expected 9 percent decline.

Cattle on feed as of March 1 stood at 10.86 million head this year compared to the same time last year, a decline of 7 percent. Pre-report industry predictions placed the on-feed number at down 6.5 percent, making the expectation and USDA’s official estimate relatively inline. The month-to-month on-feed comparison was down 2 percent.

All of the major cattle-feeding states—as well as all but one of the minor cattle-feeding states—saw declines in their year-toyear March 1 on-feed numbers. Of the main four feeding states, Texas saw the largest percentile declines. Compared to last year’s numbers, Texas’ March 2013 numbers were down 10 percent at 2.55 million head on feed. Colorado was next for on-feed losses with 990,000 head, a 9 percent decline from last year. Kansas and Nebraska lost 7 and 5 percent, respectively, with 2.05 million head on feed for Kansas and 2.43 million head on feed for Nebraska.

Washington was the only state to not see declines in its cattle on feed numbers, though neither did it see increases either. Washington stayed pat with March 1, 2012, this year with an on-feed count of 233,000 head.

According to Steve Meyer and Len Steiner of CME’s Daily Livestock Report, the 7 percent decrease in the March 1 inventory is the largest year-on-year percentage decline since January 2009.They said this fact further solidifies their position that fed cattle supplies will tighten significantly in the second half of 2013. They also pointed out that, “the March 1, 2013 inventory was almost the smallest March 1 inventory of the past 6 years, exceeding only the 2010 inventory of 10.849 million head.”

The bullish surprise of the report was the decline in placements. It was expected that placements would fall during February 2013 compared to February 2012, but the scope of that decline in realty outstripped pre-report projections. Industry analysts surveyed by Dow Jones expected placements to be down 9 percent. The actual number, according to the USDA report, was down 13.5 percent at 1.48 million placed.

State-specific placements were unanimously down, but ranged significantly. Of the major cattle-feeding states, Colorado maintained its February placement numbers the best, only seeing a 3 percent decrease, with 160,000 head placed. Texas was next in line in terms of placement percentage losses at down 11 percent with 340,000 head placed.

Kansas and Nebraska saw steeper declines in their February placement numbers. Nebraska’s placements were down 15 percent at 350,000 head placed and Kansas was down 20 percent with 295,000 head placed.

Placements by weight category were interestingly distributed. Cattle under 600 pounds saw the smallest decline at 11.2 percent, with 355,000 head overall of that group placed. The next smallest decline—though largest group for raw numbers—was the heaviest cattle. Cattle weighing over 800 pounds saw a placement decline of 11.8 percent, with 450,000 head placed.

The 700- to 799-pound weight category saw placements down 13.2 percent at 407,000 head. The last remaining category—cattle 600-699 pounds—saw both the largest decline in placement percentage and the lowest overall placement numbers. At 270,000 head placed for this category, its rate was down 19.4 percent.

“The average weight of cattle placed in February was 714.2 pounds, nearly 9 pounds or 1.3 percent lower than one year ago,” said Meyer and Steiner. “That average in-weight was tied for the third lowest for February in the current Cattle- On-Feed data series that dates back to 1996. Over time, February has marked the peak for placement weights during the year. The 2007-2011 average for February is 722.5 pounds.”

The surprisingly low placement numbers prompted many to call the report bullish. Troy Vetterkind of Vetterkind Cattle Brokerage opined shortly after the report came out that the results would likely be supportive of the cash market last week and subsequently friendly to futures.

Marketings were down 6.7 percent in February, mostly in keeping with prereport industry predictions of 7.3 percent. Marketings for February stood at 1.64 million head.

The entire quartet of major cattle-feeding states saw declines in their marketing numbers. Nebraska saw the smallest decline—3 percent—with 380,000 head marketed. Texas’ marketing numbers shrank 5 percent with 395,000 head and Kansas shed 10 percent with 345,000 head marketed. Colorado’s marketing numbers retreated 15 percent at 170,000.

Three states saw marketing increases: Arizona, Iowa and Washington. Arizona and Washington are relatively small cattle-feeding states, so the increase of a few thousand head was enough to move the mark fairly drastically. With 27,000 head marketed, Arizona increased by 29 percent for February. Washington’s February marketing numbers increased 6 percent with just an addition of 2,000 head with a total 34,000 head marketed.

Though trailing significantly in volume relative to the four major cattle-feeding states, Iowa represented the fifth-largest state for marketings with 68,000 head marketed in February. This was a 10 percent increase over its February 2012 number.

Livestock slaughter

The March USDA Livestock Slaughter report also came out on Friday, March 22. Federally inspected red meat production (meat from adult cattle and calves, sheep and lambs, goats and hogs) was down in February of 2013 compared to February of 2012. This February’s production stood at 3.63 billion pounds, compared to last February’s 3.87 billion pounds, a 6 percent decline.

Federally inspected beef production in February was 1.84 billion pounds, down 7 percent from the same month last year. This was with a federally inspected slaughter level of 2.31 million head, an 8 percent decline compared to February 2012. At the same time, average live weight of federally inspected cattle had increased 1 percent from 1,310 pounds in February 2012 to 1,323 pounds in February 2013.

Beef represented 50.8 percent of all federally inspected red meat produced in February. The year-to-date production of beef (January and February of 2013) is running 10 million pounds ahead of the same time last year.

All classes of federally inspected cattle slaughtered decreased this February compared to last February, but their respective proportions shifted in some cases.

Steers represented 48 percent of all cattle slaughtered in February at 1.11 million head. This portion was up slightly from February 2012’s 47.1 percent. Heifer slaughter decreased slightly—from 31.1 percent to 29.8 percent—at 689,000 head.

Overall cow slaughter remained relatively stable—20.2 percent in February 2012 and 20.7 percent in February 2013—though increased dairy cow slaughter was responsible for the slight shift in proportion. Bulls remained steady at 1.6 percent of the slaughtered cattle population of February with 37,000 head processed.

Federally inspected pork production was down 6 percent in February at 1.78 billion pounds. This was with a 5 percent decrease in number of hogs processed—8.53 million—and a 1 percent decline in live weight of hogs for slaughter at 277 pounds. Pork production represented 48.7 percent of all federally inspected red meat produced in February 2012. — Kerry Halladay, WLJ Editor

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