Cattle on Feed called slightly bearish

Jun 28, 2013

The most recent Cattle on Feed report showed that cattle in feedlots of over 1,000 head capacity were down as of June 1, and placements into and marketings out of the same feedlots during the month of May were also down. Though the results were slightly different from pre-report analyst expectations, to the point that some called the report slightly bearish, there was little of surprise in the report.

Total cattle on feed as of June 1 numbered 10.74 million head, down 3.1 percent from the same time last year. Pre-report industry estimates placed the on-feed number at 3.5 percent. Despite this year-on-year decline, the on-feed population is in keeping with the five-year average. North American Risk Management Services (NARMS) pointed out that on-feed numbers usually decline by about 800,000 head from Jan. 1 to June 1, but this year has seen only a decline of half that amount.

The percentile decrease was seen fairly consistently in the specific states, with almost all individual states’ cattle on feed populations being down around 3-5 percent.

Of the largest cattle-feeding states, Colorado was down the most with only 94 percent of its 2012 June 1 on-feed populations, at 960,000 head. Kansas and Nebraska were the least changed at down 1 and 2 percent, respectively. Kansas saw 2.06 million head on feed and Nebraska had 2.32 million head. Texas saw a 5 percent decline in its on-feed population with 2.63 million head.

The most extreme year-on-year percentile changes were seen in some of the smaller cattle-feeding states. California had the largest percentile increase—up 4 percent compared to June 1, 2012—with 510,000 head on feed, and South Dakota saw the greatest percentile decrease with 215,000 head on feed, a 7 percent decline from last year.

COF (from page 1) Placements of cattle into feedlots with a 1,000-head capacity or higher were lower for the course of May this year compared to last. With 2.05 million head placed during May, placements decreased 1.7 percent. This was in comparison to pre-report industry projections of a 3.1 percent decline. However, it is important to note, the placement number was 8.3 percent higher than the five-year average for the month of May. This, and the surprisingly high placements relative to expectations, is where some of the claims of bearishness come from.

“We started the year with a larger supply of feeders outside of feedlots than the year prior and this has showed up in the number of cattle placed on feed this past spring,” Steve Meyer and Len Steiner of CME’s Daily Livestock Report pointed out.

“For the period Jan-May, U.S. feedlots placed a total of 9.056 million head of cattle on feed, 98,000 head more than a year ago. High feed costs and poor feeding margins slowed down the flow of cattle into feedlots late last year and earlier this year.” They also suggested the report implies “that there will be a few more cattle coming to market in the last four months of the year than previously expected.”

Another noteworthy detail of placements was the unmistakable shift towards placing heavy cattle. Placements of cattle between 700-799 pounds were up 4.7 percent, and placements of cattle 800 pounds or more were up 19.6 percent. Not only did the heavyweights see the greatest increase in placements percentile-wise, they were also the most voluminous at 800,000 placed during May.

At the same time, placements of cattle ranging from 600-699 pounds were down 13 percent, and placements of cattle under 600 pounds decreased 25 percent. These classes of cattle saw 304,000 head and 390,000 head placed, respectively.

“Placements of heavier cattle imply the additional pounds will be skewed more towards the front of the holiday season (late Sept.- Oct.),” opined Meyer and Steiner. “However, the market has been buoyed recently on speculation that high pork and chicken prices could push retailers and foodservice operators to feature more beef during the year end holiday season.”

NARMS, too, saw the placement weights as suggestive of the future.

“The average placement weight was the highest for May for the past ten years. The result of placing heavier weight cattle will be a quicker turnaround in feedyards—and very likely heavier carcass weights. August and September fed cattle supplies will be larger in number and heavier in weight than has been see for several years.

“It is surprising to see the number of heavy feeder cattle that have been placed on feed the past two months. High feed costs have discouraged the cattle from being placed at lighter weights, but poor grazing and forage conditions were not expected to be enough to carry the cattle this long outside feedyards.”

Marketings during May were lower than expected and this, too, added to some of the claims of bearishness in this report. At 1.95 million head marketed, marketings were down 3.4 percent. Pre-report expectations had placed the marketings numbers at a 2.1 percent decline.

State by state, marketing shifts were all over the map. The big four cattle-feeding states were consistently reduced in their May 2013 marketings as compared to May 2012, and all the gains seen in year-to-year marketings were posted in small cattle-feeding states.

Colorado saw a marketings decline of 12 percent, with 150,000 head marketed in May. Kansas’ and Nebraska’s marketings were down 1 and 6 percent, respectively, with Kansas marketing 410,000 head in May and Nebraska marketing 510,000 head. Of the big states, Texas saw the largest percentile decline in May marketings at down 7 percent with 465,000 head marketed.

The biggest percentile marketing increase was seen in Idaho, which marketed 41 percent more cattle in May this year than last with 45,000 head. Entertainingly, Idaho also saw a 41 percent increase in its May placements. — Kerry Halladay, WLJ Editor