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Fewer Cattle Placed than Expected

Fewer Cattle Placed than Expected
Marketings lower than expected as well. Resulting numbers show inventory matched expectations

Cattle and calves on feed for slaughter market in the United States for feedlots with capacity of 1,000 or more head totaled 10.656 million head on Aug. 1, 2012. The inventory was 0.7% above Aug. 1, 2011 and matched pre-report trade estimates.

Also from producer surveys USDA estimated 1.922 million cattle went into feedlots in July. That's down 10.0% from last year and 1.4% below the average trade guess in advance of the report.

Fewer Cattle Placed than Expected

Fewer cattle going into feedlots than analysts expected suggests cow-calf producers are bending over backwards to do everything possible to keep cattle on farms and ranches rather than sell them to feedlots "too cheap." Feedlot managers are working just as hard to pay less for feeder cattle in hopes to offset the sharply higher costs to feed them due to pricy feed.

Net placements totaled 1.86 million head. During July, placements of cattle and calves weighing:

  • less than 600 pounds were 500,000
  • 600-699 pounds were 325,000
  • 700-799 pounds were 470,000
  • 800 pounds and greater were 627,000

Marketings of fed cattle during July totaled 1.913 million, slightly below 2011.  Other disappearance totaled 63,000 during July, 11% below 2011.

Structural changes may skew numbers. USDA's mid-year cattle inventory tally as of July 1 suggests the total U.S. feedlot population is lower than would be suggested by the number of cattle on feed in recent monthly Cattle on Feed Reports. The monthly reports survey only feedlots with 1,000 head capacity or more. USDA's annual and mid-year inventory reports cast a wider net to attempt to reflect smaller feedlots as well.

Running the numbers.

Some feedlots that were near the 1,000-head capacity threshold have grown. Some smaller feedlots have exited the business. The result - a higher percentage of the cattle actually on feed are getting counted in the monthly reports. Attempting to expand the monthly data to an estimate for the U.S. may overstate the actual number on feed.

If this phenomenon is occurring, USDA statisticians will eventually document it. They'll adjust their algorithms to reflect it.

Meanwhile analysts think recent monthly reports imply total inventories are 1.5 to 2% higher, year-on-year, than they would have been had the industry's structure remained constant. July reports illustrated the point with the Cattle on Feed Report showing inventories in the big lots 2.7% higher than last year while the Cattle report showed inventories in all lots up only 0.8%.

The implication - actual future beef supplies could be even tighter than suggested by the monthly reports. If so, it makes a case for even higher prices down the road. However, it is difficult to tell how much of the supply shift from the perceived structural changes the market has already factored into prices.

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