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Agricultural News

Dr. Darrell Peel Confirms Cattle Situation Improving Citing New Cattle on Feed Report

Mon, 25 Jul 2016 10:14:00 CDT

Dr. Darrell Peel Confirms Cattle Situation Improving Citing New Cattle on Feed Report 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 gives his analysis of the current cattle market in light of the recent Cattle on Feed report.

"The July Cattle on Feed report confirms that the feedlot situation continues to improve in 2016. Feedlot placements in June were up year over year but less than expected at 103 percent of last year. June marketings were as expected at 109 percent of last year; the largest June marketing level since 2012. The July 1 feedlot inventory was 101 percent of last year, up slightly less than expected as a result of the smaller placements.

"The result of herd expansion in 2014 and 2015 was a January 1, 2016 estimate of a 5.3 percent year over year increase in feeder cattle supplies. Those feeder cattle began showing up in feedlots with year over year increases in placements the past five months. Since February, feedlots have placed 572 thousand more cattle compared to the same period last year. However, over the same period feedlots have accelerated marketings to clean up the backlog that crashed fed cattle markets in late 2015. Feedlot marketings since February have increased 478 thousand head compared to one year ago. With the increase in marketings nearly matching the increase in placements, feedlot inventories are growing only slowly. 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, 10 pounds less year over year, with heifer carcass weights down five pounds at 798 pounds. The Cold Storage report was also released last week and indicated that although beef in cold storage rose counter-seasonally by 1.1 percent from May to June, the June total was still 4.9 percent below year earlier levels.

"Missing from the slate of late July USDA cattle reports was the July Cattle report which 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 (NASS) 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.

"In the absence of the mid-year inventory report, other information provides some clues regarding the status of herd expansion. The July Cattle on Feed report also provided quarterly steer and heifer feedlot inventories. Heifers on feed on July 1 were 4.8 percent 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 percent but is growing each month. Heifer slaughter in June was up 4.8 percent compared to last year, the first year over year increase in monthly heifer slaughter since December, 2013. Beef cow slaughter is up from year ago levels by 7.9 percent for the year to date and is also accelerating. June beef cow slaughter increased sharply by 20.5 percent 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. Nevertheless, additional beef herd expansion is expected in 2016, albeit at significantly slower pace than 2015.

"The bigger question may be whether herd expansion will continue in 2017. 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. The cattle industry continues to face tremendous uncertainty including global dynamics, domestic political chaos, and massive market volatility. Unfortunately the failure of USDA-NASS to provide the July Cattle report adds to the uncertainty about the current situation as well as what is to come."



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