Cattle on feed down, placements up

Markets
Nov 8, 2013
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After more than two weeks delayed, the September/October Cattle on Feed (COF) report was released to little fanfare. The results were called neutral though analysts predict it bodes well—or badly, depending on your perspective—for months to come. Tight supplies of cattle are coming.

Cattle on feed in feedlots with a 1,000 head or greater capacity came in at 10.14 million head on Oct. 1, an 8 percent decline from the same time in 2012. This, however, was in line with analysts’ pre-report average expectations of down 7.5 percent.

“This is the smallest Oct. 1 on feed inventory since 1998,” said Darrell Mark, adjunct professor of economics at South Dakota State University. “The small number of cattle on feed is largely responsible for the push to record high fed cattle prices at the end of October.”

The October COF report also included a quarterly stock of the makeup of the on-feed herd. Steers and steer calves on feed made up 64 percent of the on-feed inventory at 6.44 million head. This was down 7.5 percent from the same time last year, when steers and steer calves made up 63 percent of the inventory. Cows and bulls on feed numbered at 40,000 head, a 35.5 percent drop from the same time last year.

Of course, the most interesting on-feed class was the heifers and heifer calves. At 3.66 million head, they represented 36 percent of the on-feed inventory and declined in number by 7.7 percent. In October of 2012, heifers and heifer calves were more numerous, but also represented 36 percent of the on-feed inventory. This could mean that the much anticipated heifer retention has not yet begun.

All of the big cattle-feeding states—Colorado, Kansas, Nebraska and Texas—saw declines in their on-feed numbers. Colorado was down 13 percent at 870,000 head on feed, Kansas was down 10 percent with 2 million head, Nebraska was down the least at 5 percent with 2.21 million head, and Texas was down 8 percent with 2.46 million head. The only state to see year-to-year increases was California, up 5 percent, with 500,000 head.

Placements of cattle into feedlots during September came in right on expectations, as well. The pre-report average estimate for placements was up 0.5 percent, and the reality was up 1 percent. However, it is worth noting that the spread on the analysts’ pre-report estimates was almost 10 percentage points, with the lowest being down 2.5 percent and the highest being up 7 percent. This wide variation stemmed from the highly individualized and regional reports of heifer retention going on among cattle producers.

Cattle placed into feedlots during September numbered 2.03 million head.

“While September’s gross placement may have been somewhat larger than the record low seen in 2012, the net placement (gross placement minus other distributions) is actually 1 percent smaller,” John Harrington, DTN livestock analyst, pointed out.

Almost all reported states—with the drastic exceptions of Colorado, South Dakota and Washington— placed more cattle in September, 2013 than September, 2012. Colorado was down 16 percent with 190,000 head placed. It has been noted, however, that there is a shortage of feeder cattle in the area and feeder cattle from other states are being shipped in to try to meet the demand.

Kansas and Nebraska posted gains in their year-to-year placement numbers, at 390,000 head (up 4 percent) and 520,000 head (up 11 percent), respectively. The other big cattle-feeding state of Texas stayed steady at 480,000 head.

Placements by weight classes still show a strong preference for heavier cattle. Compared with the same time last year, placements of cattle under 600 pounds dropped 8 percent at 475,000 head and placements of cattle weighing between 600-699 pounds dropped 6 percent with 335,000 head. Cattle weighing between 700-799 pounds saw a placement increase of 8 percent at 480,000 head, and cattle over 800 pounds saw 735,000 head placed, a 7 percent increase.

“Despite the increase in bigger feeders, this placement data suggests that the early year fed supply will remain quite tight,” said Harrington. “The DTN placement model now estimates that big lots have 1.755 million head scheduled to finish in January, 10 percent below January of 2013.”

Mark noted that cattle feeders are likely to place more lightweight calves on feed in the near future, as spring calves are weaned this fall and corn prices continue to decline.

“However, cattle on feed inventories will likely remain below year-ago levels for the next several months as the historically small cattle herd continues to be realized at the feedyard level,” he added.

Marketings provided the only slight surprise in this otherwise neutral report. Actual marketings for September were up 6 percent at 1.7 million head, compared to the pre-report average expectation of marketings being up 4.5 percent. Harrington said this made sense, however, given the impressive strength in the feedlot trade seen during September.

Mark pointed out there’s more to the marketing numbers than meets the eye.

“[Marketings are] about 6 percent above September, 2012; however, when adjusting for one extra slaughter day in September, 2013, average daily marketings were up 0.8 percent. Moreover, the relatively constant marketings compared to last year is consistent with federally-inspected steer and heifer slaughter for September, 2013 being only marginally higher than a year ago.”

Marketings by states saw the same pattern demonstrated in placements; Colorado, South Dakota and Washington lagged behind while all other reported states posted gains on their year-to-year marketing numbers. Colorado was down 3 percent with 145,000 head marketed. Kansas’ marketings were up 15 percent with 355,000 head marketed. Nebraska was up 5 percent with 390,000 head marketed, and Texas was up 8 percent at 430,000 head marketed. — Kerry Halladay, WLJ Editor

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