Cattle on Feed report called neutral

Markets
Nov 29, 2013
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The November Cattle on Feed report came in dead on the pre-report industry expectations. Though many have called it neutral for this reason, Steve Meyer and Len Steiner of CME’s Daily Livestock Report called it slightly bearish.

“USDA’s monthly Cattle on Feed report…will likely be viewed as slightly bearish by cattle traders today. That sentiment will primarily be driven by slightly higherthan-expected placements.”

The number of cattle on feed in feedlots with 1,000 head or greater capacities on Nov. 1 was down 5.7 percent compared to the same time last year. Compared to last year’s Nov. 1 on-feed population of 11.25 million head, this year’s was 10.61 million head. This compares to the average pre-report industry projection of down 5.8 percent.

“This figure, of course, encompasses the cumulative reductions in placements and marketings over the past 6 months or so and thus will continue to lag year-ago levels until placements grow larger,” Meyer and Steiner pointed out.

“We don’t think that is going to happen on any regular basis any time soon, given the incentives to hold heifers and thus reduce feeder cattle supplies.”

Tim Petry, Livestock Economist North Dakota State University Extension Service, put the on-feed numbers in perspective.

“The inventory was almost 6 percent below Nov. 1, 2012, and marks the 15th consecutive month with lower cattle on feed numbers than the previous year. And it was the lowest number of Nov. 1 cattle on feed since the data series began in 1996.”

All of the four major cattlefeeding states saw declines in their year-over-year Nov. 1 on-feed numbers. Colorado’s and Kansas’ on-feed population were both down 8 percent with 950,000 and 2.05 million head, respectively. Nebraska’s Nov. 1 numbers were down 4 percent with 2.37 million head on feed, and Texas was down 5 percent with 2.53 million head on feed. The only state that saw increases in its on-feed numbers was California, which increased 5 percent over Nov. 1, 2012, with 505,000 head. Alternately, Oklahoma saw the greatest decline in its on-feed population, down 22 percent at 270,000 head on feed.

Placements of cattle into feedlots were up 9.8 percent compared to the same time 2012. This lined up closely with pre-report industry expectations. At 2.39 million cattle placed into feedlots, it was “far and away the largest monthly figure for 2013,” noted Meyer and Steiner.

“That November placements are larger than other months is no surprise as the normal seasonal pattern sees placement numbers peak in November. The unusual part is the increase of nearly 370,000 head from October to November this year. Lower feed prices are a big part of that. Better pasture conditions had allowed cattle to be held on pasture instead of placed onto high cost grainbased diets.”

Darrell Peel, Livestock Marketing Specialist of the Oklahoma State University Extension, had some historical reminders regarding the placement numbers.

“Some perspective is important to interpret this report. October placements were down 1 percent from the five-year average that include last year and were down 5.3 percent from the 2007-2011 five-year average. The latest October placement number was slightly smaller than the 2002 level and, with the exception of last year, was the smallest October placement since 1995. By any measure except last year’s record low level, it is still a small.”

All of the major cattlefeeding states saw increases in year-to-year placements, and most of them over the overall increase of 9.8 percent. Colorado’s and Texas’ placements were both up 18 percent with 230,000 and 530,000 head placed, respectively. Kansas’ placements jumped markedly with 470,000 head placed, an increase of 24 percent. Nebraska was the only state that did not see placements increase in line with the country’s average. At 630,000 head placed on feed, Nebraska saw a 7 percent increase in yearto-year placements.

Placements by weight classes saw a rather radical shift from recent trends. While in the past months the heaviest weight class—cattle over 800 pounds—had the largest numerical placements, as well as percentile increases, the emphasis shifted back to lighter animals.

The lightest weight class— cattle under 600 pounds— had the largest placement numbers at 720,000 head. This was a 5.9 percent increase over the same time last year. Cattle weighing between 600-699 pounds were the next most populated class for placements at 585,000 head placed, up 15.6 percent from last year.

Placements of cattle weighing between 700-799 pounds saw the largest yearover-year increase at up 17 percent. At 510,000 head of this weight class placed, it was the least common class. Placements of cattle weighing over 800 pounds increased only 3.5 percent with 580,000 head placed from that group.

“The average placement weight for October was 689.7 pounds, almost identical to last year’s 690.1,” reported Meyer and Steiner, speaking of the most recent placement numbers.

“Thirty percent of October placements weighed less than 600 pounds, while 24.2 percent weighed over 800 lbs. Those numbers compare to 31.2 percent and 25.7 percent [respectively] one year ago. We think these figures point to a return to more normal placements patterns following the big disruptions caused by poor pastures condition and high feed prices.

The unusual patterns date back to 2011 and conditions seem right for this return to normalcy to persist—at least until we run into our next bout of abnormal weather.”

Marketings were likely the least exciting of the most recent report. Overall, marketings from feedlots with capacities of 1,000 head or greater increased 1 percent at 1.86 million head, compared to the expectation of a 1.5 percent increase.

In the major cattle-feeding states, marketing numbers were mixed. Colorado’s marketings declined 9 percent with 145,000 head marketed. Texas’ numbers stayed a strong steady with 440,000 head marketed this year during October compared to last year’s 430,000. Both Kansas and Nebraska saw increases in their marketings—up 10 and 7 percent, respectively— which help offset the effects of Colorado’s and Texas’ numbers on the country’s overall marketings. Kansas marketed 400,000 head, while Nebraska marketed 455,000 head. — Kerry Halladay, WLJ Editor

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