Feeder Cattle Numbers Shrinking- Feedlot Inventories to Follow SuitMon, 06 Feb 2012 16:34:32 CST
A previous article from Dr. Derrell Peel of Oklahoma State University reviewed how the latest USDA Cattle report confirmed the impact of the drought in 2011 with continued liquidation of cattle numbers and dramatic regional shifts in cattle numbers- click here for that story as posted on Monday, January 30th. This article will look at what the report indicates about prospects for 2012.
According to Dr. Peel. one important issue is the implication for feeder cattle supply in 2012. The January 1 estimate of feeder cattle outside of feedlots is 25.85 million head, down 1.06 million head (3.9 percent) from one year ago. Remember that the feeder supply last year was down 2.9 percent from 2010. In total, the U.S. feeder cattle supply has dropped 1.85 million head or 6.7 percent in the past two years. However, the January 1, 2012 Cattle on Feed inventory was 14.12 million head, up nearly one percent from the previous year. Moreover, the feedlot inventory on January 1, 2011 was up 2.7 percent from 2010. The point is that feedlots have done a remarkable job of maintaining feedlot inventories but only at the expense of future feeder cattle supplies. It seems less and less likely that this can continue.
One measure of this intensity of feeder cattle use is to look at the ratio of feedlot inventory to the feeder cattle supply. For January 1, 2012, this ratio or percentage was 54.85 percent. This is a record high for this statistic. This value means that for every animal in feedlots on January 1, there were only 1.83 feeder animals outside of feedlots to replace them. This statistic has increased since the mid-1970s. In 1975, the value was 17.2 percent meaning that there were 5.8 feeder animals outside feedlots for every one already placed. As recently as the mid-1990s this value was about 38 percent meaning that there were 2.6 animals available for every animal in feedlots. The industry has continued to get more intensive with the use of feeder animals but it is unlikely that this percentage can continue to increase.
Another measure of the intensity of feeder cattle use is to look at the estimated feeder supply as a percent of the previous year’s calf crop. This provides a measure of how many animals are being carried over from one year to the next. The value for 2012 was 72.9 percent, the second lowest value for this statistic. It indicates that more calves were “used” quickly relative to the size of the calf crop. This certainly reflects the drought induced early placements that occurred in the summer and fall of 2011. This statistic averaged 75.8 percent the past five years and was as high as 82 percent at the last cyclical peak in cattle numbers in 1995. The point is that there were less feeder cattle brought into 2012 and that less will be available this year for placement in feedlots.
These two measures both indicate that the long standing tendency of the industry to pull cattle ahead, i.e use them more intensively, accelerated significantly the past two years and it is unlikely that it can continue for another year. I admit that I have been amazed at the industry’s ability to find feeder cattle when it seems there are no more. However, that ability last year was based on very unusual behavior such as placing Mexican cattle directly in feedlots at light weights and was abetted by the drought forced early placement of calves. I don’t think the industry has many more tricks up their sleeve and I expect to see feedlot inventories contract as we move through the next few months. Just how much feedlot inventories will decrease will depend, in part, on how much heifer retention occurs in 2012 and that will be the subject of the next article.
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