Agricultural News
OSU's Dr. Derrell Peel says There are Two Stories in the Latest Cattle on Feed Report
Mon, 26 Sep 2011 13:18:46 CDT
The September Cattle on Feed report was a bit of a surprise; at least in some respects. Placements were well below the range of pre-report estimates at 99 percent of a year ago and that, combined with marketings at 107 percent of last year, which was on the upper end of the estimates, put the September 1, cattle on feed inventory at 105 percent of last year, noticeably less than the expected level of 108 percent.
According to Dr. Derrell Peel, Oklahoma State University Livestock Marketing Specialist, the expectations for this report reflected a focus on one market factor but failed to anticipate the other story in this report. Widespread expectations that the drought was continuing to force cattle into the feedlot early were borne out dramatically by the sharp increase in placements in Texas, up 15 over year ago levels for the month, and by the placement weights, in which all of the increase was in the under 600 pound category. In total, placements of cattle weighing less than 600 pounds was up 44 percent, led by Texas, which was up 70 percent.
In Nebraska, total placements were down, at 93 percent of last year, but placements of under 600 pound animals was up 63 percent year over year for the month. This likely reflects movement of lightweight feeder cattle out of the drought areas. There are indications that numerous cows have been placed in feedlots as well but it is unclear if the cows are accounted for in the cattle on feed total. The weight distribution would not suggest very many cows in the on-feed total but the COF questionnaire does not clarify cows versus steers and heifers on feed. Nevertheless, the drought impacts were much as anticipated and were very dramatic.
What was not well anticipated was the fact that, in absence of the drought, feeder supplies are extraordinarily tight and that led to significantly lower placements in some other parts of the country. Placements were down 15 percent in Kansas and 10 percent in Iowa and 7 percent in Nebraska.
Placement weights tell the story even more dramatically. Though the lightest weight placements were up 44 percent, placements of cattle over 600 pounds was down 13.5 percent. Poor feeding prospects likely also contributed to fewer placements, especially given the lack of heavy feeders available. Without the drought, total placements in July would have been substantially lower and in August would have well below last year and the on-feed total for September 1 would have been about even with last year.
What to expect for the rest of the year? Placements of lightweight feeders should decrease as most of those cattle have now moved out of drought areas or have reached higher weights. Additionally, imports and placement of lightweight Mexican cattle have dropped sharply after the state of Chihuahua dropped to a lower TB status in August, which will restrict feeder imports for the remainder of the year.
Calves and summer stockers have performed excellently in areas north of Interstate 70, where forage quantity and quality have been very good. Those cattle will begin moving into feedlots in September and October, thus producing a somewhat more normal placement weight distribution. Lightweight calves from the southeast that usually move into winter grazing in the Southern Plains will likely move into other areas for backgrounding, though some will move directly into feedlots.
Though it is difficult to know what would have happened, it seem likely that some 500,000+ head of cattle were placed in July and August that would not have been placed until the fall without the drought. Drought impacts may continue but feeder movements from this point on are consistent with normal seasonal patterns. Cumulative feedlot placements for the year to date are up 3.5 percent despite the fact that estimated feeder supplies were down 3.3 percent in January and 2.5 percent in July.
No doubt some potential replacement heifers have entered feedlots due to the drought and increased feeder imports have boosted feeder supplies but much of the difference is in the timing. Feedlot placements in September and October are likely to be down from year ago levels. Feedlots will have an increasingly difficult time maintaining inventories through the end of the year and into next year.
Our thanks to Dr. Peel for this latest analysis of the cattle marketplace. This article was part of the Cow-Calf Corner Newsletter, which is sent out on most Mondays by Dr. Peel and Dr. Glenn Selk.
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