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Agricultural News

Feedlots Pull Cattle Forward- Helping Carcass Weights Drop in the Beef Pipeline- Derrell Peel Sees Fundamental Shift in Marketings

Mon, 09 May 2016 11:02:56 CDT

Feedlots Pull Cattle Forward- Helping Carcass Weights Drop in the Beef Pipeline- Derrell Peel Sees Fundamental Shift in Marketings Mondays, Dr. Derrell Peel, Oklahoma State University Extension Livestock Marketing Specialist, offers his economic analysis of the beef cattle industry. This analysis is a part of the weekly series known as the "Cow Calf Corner" published electronically by Dr. Peel and Dr. Glenn Selk. Today, Dr. Peel looks at beef production thus far in 2016.

"Beef production for the year to date in 2016 is up 3.0 percent year over year. This increase is faster than expected as earlier expectations were for more of the annual increase in beef production to occur in the second half of the year. However, recent changes in beef production have implications for the timing and possibly for total beef production for 2016.

"Weekly beef production increased sharply beginning in March; the result of a jump in cattle slaughter. In the last eight weeks, total cattle slaughter has risen 3.3 percent year over year, with steer slaughter up 8.5 percent and beef cow slaughter up 6.2 percent. Heifer slaughter was still down, 3.9 percent, along with dairy cow slaughter, down 4.1 percent from the same period last year. Feedlots have not only marketed at a good pace, but have actively pulled cattle forward. This has reduced days on feed in feedlots and reduced carcass weights dramatically. Steers carcass weights dropped by 26 pounds from an early March peak of 896 pounds to 870 pounds in the most recent data week. The latest steer carcass weights are only 4 pounds heavier than the same date one year ago. This is the smallest year over year increase in weekly carcass weights since July 2014. Heifer carcass weights are down 29 pounds from 836 pounds in early March to 807 pounds in the latest data.

"The current decrease in carcass weights is consistent with typical seasonal declines but really represents a more fundamental change in feedlot behavior. From mid-2014 through late 2015 feedlots delayed marketings and pushed up carcass weights. From late 2015 feedlot through February, marketing rates increased to marginally improve feedlot currentness and pull carcass weights down slightly. However, it appears that only recently have feedlots marketed cattle fast enough to materially affect current beef production and set the stage for additional improvements later in the year.

"Increased cattle slaughter in recent weeks has created a short term bulge in beef supplies that has weighed on boxed beef and fed cattle prices.   This is a result of the transition to faster feedlot turnover rates. The payoff comes from the decrease in carcass weights that will temper beef production in the next few weeks. Cattle pulled ahead now will moderate seasonally large cattle slaughter through June and, combined with lower carcass weights, will hold total beef production to smaller year over year increases. There may be improvement in the second half of the year as well if relatively lower carcass weights continue into the fall. Increased feedlot placements, which began in February, will begin showing up in slaughter by late July but the pace of beef production increase in the third and fourth quarters of the year may be reduced if carcass weights continue with little or no year over year increase through the remainder of the year. This can happen if feedlots continue with a faster marketing pace. Hopefully, the painful lessons of the fall 2015 fed cattle market crash are not lost on both feedlots and packers this year.

"Much of the recent speed up in feedlot turnover can be attributed to the current severe discount on live cattle futures for coming months. However, lower feeder cattle prices and continued low feedlot cost of gain should maintain feedlot incentives for timely fed cattle marketings going forward. Steer and heifer carcass weights in the next few weeks will be a good indicator of beef supply conditions in the second half of 2016."



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