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Latest cattle reports hint at expansion slowdown

Beef pasture cow
Economist says USDA omission of midyear inventory report reduces information needed for decision-making.

The July Cattle on Feed report confirms the feedlot situation continues to improve in 2016.

That's the analysis of Derrell S. Peel, Oklahoma State University extension Livestock marketing specialist. Peel notes feedlot placements in June were up year-over-year, but less than expected at 103% of last year's level.

June marketings were as expected at 109% of last year, and the largest June marketing level since 2012. The July 1 feedlot inventory was 101% of last year, up slightly less than expected as a result of the smaller placements. 

Peel says the result of herd expansion in 2014 and 2015 was a Jan. 1, 2016, year-over-year increase in feeder-cattle supplies by an estimate of 5.3%. Those feeder cattle began showing up in feedlots the past five months with year-over-year increases in placements.

He adds that, since February, feedlots have placed 572,000 more cattle compared with the same period last year. In that same time period, feedlots have accelerated marketings to clean up the backlog that crashed fed cattle markets in late 2015. Feedlot marketings since February have increased by 478,000, compared with the numbers one year ago. This means with the increase in marketings nearly matching the increase in placements, feedlot inventories are growing only slowly, Peel adds.

With a faster turnover rate, feedlots are more current and continue to pull carcass weights down. In the latest weekly data, steer carcass weights were 875 pounds, which is 10 pounds lighter than last year, and heifer carcass weights dropped five pounds to 798 pounds.

The Cold Storage report also was released last week and indicated that although beef in cold storage rose counter-seasonally by 1.1 % from May to June, the June total was still 4.9 % below year-earlier levels.

USDA's decision not to publish a July Cattle inventory report cuts into the analysis possible, but Peel says the data we have can offer some insights.

A July Cattle report would have provided an indication of continued herd rebuilding, heifer retention and the size of the 2016 calf crop.

"With the dramatic adjustments in cattle prices in recent months, cattle producers are understandably very concerned about the status of herd rebuilding as they make decisions that will position them for production in 2017 and beyond. The decision by USDA’s National Agricultural Statistics Service to cancel this report this year is a significant disservice to the cattle industry and deprives cattle producers of critical information that will affect them for many months, Peel says.

Some hints from the other data which may be helpful:
• The July Cattle on Feed report provided quarterly steer and heifer feedlot inventories. Heifers on feed on July 1 were 4.8% above year ago levels, and indicate, as did the larger April quarterly number, that heifer retention is likely slowing down.
• Heifer slaughter for the year to date is down 2.7% but is growing each month. Heifer slaughter in June was up 4.8% compared with last year. This is the first year-over-year increase in monthly heifer slaughter since December, 2013.
• Beef cow slaughter is up from year-earlier levels by 7.9% for the year-to-date and is also accelerating. June beef cow slaughter increased sharply by 20.5% over last year.

"Both heifer and beef cow slaughter will inevitably rise as cattle numbers grow but the pace in these recent values suggest that herd expansion slowing down," Peel says. Nevertheless, additional beef herd expansion is likely in 2016, although at a slower pace than in 2015.

"The bigger question may be whether herd expansion will continue in 2017," Peel says. "The faster and sharper contraction in cow-calf returns in recent months makes this a smaller prospect than just a few months ago. Many evolving demand and supply factors that are currently unknown will determine the trajectory of cattle inventories in the next two or three years."

TAGS: Farm Life
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