Cattle on Feed called neutral; steer, heifer slaughter up

Markets
Jan 31, 2014
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—Fewer beef cows slaughtered in December

The most recent Cattle on Feed report came with a few surprises compared to prereport estimates. While the actual on-feed numbers came in almost dead on prereport expectations, the average industry estimate put placements almost three percentage points lower than what actually happened, and the opposite was true of marketing expectations versus reality. Despite these respectable differences between expectation and reality, the report was called mostly neutral in terms of market impact.

Numbers of cattle on feed as of Jan. 1, 2014, were down 5.4 percent with 10.59 million head compared to last year’s 11.19 million head. This compares with pre-report estimates which had expected a 6 percent decline in on-feed numbers.

All four of the major cattle feeding states—Colorado, Kansas, Nebraska and Texas—saw declines in their numbers of cattle on feed. Colorado was down 4 percent with 960,000 head on feed. Kansas and Nebraska were down 5 and 3 percent respectively, with 2.01 million and 2.4 million head on feed. Texas saw the largest decline of the major feeding states with a 10 percent drop with 2.44 million head on feed.

California and Iowa— what would be the fifth and sixth largest cattle-feeding states—were above the national average for cattle on feed as of Jan. 1. California gained the most out of all the surveyed states, with up 6 percent with 510,000 head on feed, and Iowa remained steady with its 2013 Jan. 1 on-feed numbers with 620,000 head.

Placements during December, 2013 were a bit of a surprise to the industry, with actual placements of 1.68 million head being up 1 percent from the same time last year, compared to expectations that placements would be down 2 percent.

“The increase in placements will modestly increase cattle availability in the spring,” commented Steve Meyer and Len Steiner of the CME Daily Livestock Report. “The overall magnitude of the change, however, is relatively small since December placements usually tend to be historically small. Overall, the small inventory implies ongoing tight cattle supplies in Q2 and Q3.”

Colorado and Nebraska placed more cattle in December of 2013 than in December of 2012, at up 7 percent with 150,000 head and up 4 percent with 405,000 head placed, respectively. Kansas placements declined 1 percent with 360,000 head placed, and Texas saw the largest decline of all the states with 370,000 head placed, an 11 percent decrease.

California and Iowa gained 18 and 17 percent on their placement numbers at 59,000 and 96,000 head, respectively.

Placements by weight groups showed only slight movements among the weight classes. The lightest weight class (cattle under 600 lbs.) saw a 2.1 percent decline, with 485,000 head placed of that group. Despite being the only class to see percentile declines, it was the most voluminous class by raw placement numbers.

The next class—600-699 lbs.—increased 1.2 percent with 420,000 head placed, and the 700-799 lbs. class saw 3.2 percent more placements at 391,000 head. The heaviest weight class, those cattle over 800 lbs., increased 2.7 percent with 385,000 head placed.

While placements were up even though analysts expected them to be down, marketings had the reverse situation. Pre-report estimates had pegged December marketings up 2.2 percent compared to December, 2012. The actual numbers, with 1.74 million head marketed, were down 0.5 percent, a difference of 2.7 percent. Andrew Gottschalk of Hedgers Edge had a caveat on that number, however.

“While the marketing number as reported was below expectations, actual steer and heifer slaughter, a more accurate measurement of total marketings, was up 3.8 percent.”

State-specific marketings showed Texas finally above the pack in terms of the big four cattle feeding states. At 420,000 head marketed, Texas saw an 11 percent increase in its December marketings compared to 2012. Colorado saw a 3 percent decline in its marketings at 150,000 head, Kansas was down 9 percent at 385,000 head, and Nebraska was down 1 percent also with 420,000 head marketed.

Gottschalk noted that the combination of marketings and placements is keeping the market “current” in terms of supplies of cattle and demand for beef, and that the market should stay current for the first half of this year. However, he said tight supplies of cattle keeping the market current isn’t news. “Consumers’ reaction to higher prices and their willingness or unwillingness to pay higher prices for your product is the challenge and the ‘news.’ ”

Livestock Slaughter

The monthly Livestock Slaughter report came out almost in tandem with the Cattle on Feed report. Overall, federally inspected beef production in December, 2013 stood at 2.02 billion pounds, up 1 percent from December, 2012. Along with the beef production numbers, the number of federally inspected cattle slaughtered in December, 2013, as well as their average live weight, both increased 1 percent, with 2.52 million head slaughtered at an average live weight of 1,337 pounds.

Most interesting however is the breakdown of what classes of cattle were slaughtered. In December, 2013 compared to December, 2012, more steers and heifers were slaughtered while fewer “other cows”— i.e. beef cows—were slaughtered. Dairy cow slaughter and bull slaughter both remained mostly the same.

Steer slaughter for December, 2013 stood at 1.25 million, or 49.6 percent of total cattle slaughter. This is up 44,000 head, or 1.4 percent, above December, 2012. Heifer slaughter increased 0.9 percent to 726,000 head, making heifers 28.8 percent of total cattle slaughter.

Cow slaughter is grouped as all cows, dairy cows, and other cows. All cow slaughter dropped 2.2 percent to being 20 percent of total cattle slaughter, but almost all of that decline came from decreases in “other cow” slaughter. Other cow slaughter stood at 248,000 head, or 9.8 percent of total cattle slaughter in December, 2013. — Kerry Halladay, WLJ Editor

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