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Agricultural News


Mexican Cattle Flood into Southern Plains Feedlots as US Supplies Dwindle

Mon, 23 May 2011 13:22:10 CDT

Mexican Cattle Flood into Southern Plains Feedlots as US Supplies Dwindle Oklahoma State University Extension Livestock Market Economist Dr. Derrell Peel offers the following analysis of the cattle market in the aftermath of the Friday Cattle on Feed Report that shows big April placements this year compared to both 2010 and the five year average.


"For several months I have been anticipating that tight feeder supplies would catch up with feedlots and feedlot placements would have to decrease due to a lack of cattle. I still think that will happen but, I confess, I continue to be amazed at the cattle industry's ability to wring out feeder supplies to an extent unlike anything we have seen before. The May Cattle on Feed report shows feedlot inventories up seven percent over this time last year. However, it should be noted that the May 1 inventory is only 101.4 percent of the previous five year average and highlights the fact that we are still comparing to a small year-ago value.


"April placements were up 10 percent year over year and were up nearly 13 percent over the previous five year average for April. It is a big placement number by any measure. This highlights the obvious question of where feedlots continue to find these numbers of feeder cattle to place. It is necessary to look at the placement weight breakdown and regional patterns, along with other data to understand just how unique the current situation truly is.


"The placement weight breakdowns show a bimodal placement pattern that reflects what cattle feeders would like to versus what they are able to do. With high cost of gain and expectations for continued high feed costs, feedlots have an incentive to place heavy feeders. Indeed, of the increase in April placements, 31 percent were feeder cattle over 800 pounds. Placements weighing between 600 to 800 pounds accounted for only 16 percent of total April placements. The biggest part of the placements was feeder cattle weighing less than 600 pounds, which accounted for 52 percent of total placements. These cattle will not be marketed until roughly November. Despite high feed costs, feedlots are placing very lightweight calves-calves that would typically be part of feeder supplies later in the year.


"State to state comparisons of the placements is also instructive. Most of the increase in placements occurred in the Southern Plains. Placements were up in Kansas, Oklahoma and Texas. In Texas, where placements were up by a total of 110,000 head, 73 percent consisted of cattle weighing less than 600 pounds. Many of these lightweight cattle consisted of Mexican cattle that are directly entering feedlots rather than grazing as stockers. The lightweight placements likely also included some drought forced early weaning, especially fall born calves. Some of the 28 percent of Texas placements weighing more than 600 pounds were likely heifers diverted from planned replacements due to the drought conditions. The weight breakdown in Kansas shows that most of the increase consisted of feeders over 700 pounds. This likely included mostly yearling stockers but may have also included some heifers originally planned for herd replacements.


"Feedlot placements were also up in California, Arizona and Idaho. Although there is no weight breakdown of placements in those states it is highly likely that most of the increase was in lightweight dairy calves. Calf slaughter for the nation was down 13 percent in April and is down 11 percent for the year to date. Though calf slaughter is minor compared to total cattle slaughter, this is one more small increment to boosting placements in the short run. In contrast, April placements were down in Colorado, Iowa, Nebraska and South Dakota. The decrease is consistent with the cool, wet conditions and limited feeder supplies in the region. In Nebraska, placements of feeders over 800 pounds were up slightly but were more than offset by decreased placements in all other weight categories.


"One final unique contributor to larger feedlot inventories is decreases in the other disappearance category of the Cattle on Feed report. Other disappearance occurs for several reasons but at this time of the year often includes some lightweight cattle that initially arrive at feedlots then return to pasture when forage conditions improve. This is happening much less this year. In fact, other disappearance has been down year over year for each of the last six months. Like calf slaughter, other disappearance is a minor factor but these two, combined with direct placement of Mexican feeder cattle is indicative of the very unique situation and the intensity with which feeder markets are beating the bushes to find feeder cattle supplies.


"The vacuum of feeder cattle supplies would already be very apparent without increased Mexican cattle imports, which are unlikely to continue at current rates; reduced veal production, which is already projected to show a nearly 10 percent annual decrease; drought forced calf and replacement heifer sales, which are likely mostly done at this point; and reduced other disappearance, which is already at minimal levels. The increasingly steep downhill slope of feeder supplies is turning a precipice over which we are likely to fall in the next month or two-unless the market can pull another rabbit, or more feeder cattle, out of the hat once again."


Our thanks to Dr. Derrell Peel for his weekly anaylsis of the cattle market- which is a part of the weekly electronic newsletter that he and Dr. Glenn Selk author called Cow Calf Corner.



   

 

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