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Agricultural News

Market Watcher Derrell Peel Reacts to Surprisingly Bearish December 2017 Cattle on Feed Report

Fri, 22 Dec 2017 16:03:26 CST

Market Watcher Derrell Peel Reacts to Surprisingly Bearish December 2017 Cattle on Feed Report The USDA released the December 2017 Cattle on Feed report on the morning of Friday, December 22, 2017 morning at 11:00 a.m. Radio Oklahoma Ag Network Farm Director Ron Hays reached out to OSU Extension Livestock Market Economist Dr. Derrell Peel for his reaction to the numbers in this month's report. You can listen to their complete conversation by clicking or tapping the LISTEN BAR below at the bottom of the page.

"The December Cattle on Feed report will certainly be considered a surprise," Peel said. "The placements were up sharply higher going into this report at 14 percent year-over-year. Marketings came in just about exactly as expected at about three percent up year-over-year. And, so, the big increase in placements pushed the December on feed inventory up to 108 percent of last year."

According to the report, Cattle and calves on feed for the slaughter market in the United States for feedlots with capacity of 1,000 or more head totaled 11.5 million head on December 1, 2017. The inventory was 8 percent above December 1, 2016.

Placements in feedlots during November totaled 2.10 million head, 14 percent above 2016. Net placements were 2.03 million head. During November, placements of cattle and calves weighing less than 600 pounds were 610,000 head, 600-699 pounds were 545,000 head, 700-799 pounds were 455,000 head, 800-899 pounds were 294,000 head, 900-999 pounds were 75,000 head, and 1,000 pounds and greater were 120,000 head.

Marketings of fed cattle during November totaled 1.84 million head, 3 percent above 2016. Marketings were the highest for November since the series began in 1996.

Peel says the surprise in this report came, as it typically does, from the lighter end.

"The biggest percent increase in year-over-year was in the lightweight category - cattle placed under 600 lbs.," he reported. "Of course, November is the height of the calf run. So, what this says is feedlots took advantage of large calf numbers. Given that they've got favorable cost of gain going through the winter - they really loaded up the feedlots on these lightweight calves."

Peel suspects drought across the Northern Plains and dry conditions and slow wheat pasture development in the Southern Plains, had something to do with the increase in calves sent to feedyards, rather than kept back for backgrounding.

Going into 2018, Peel says feedlots will need to keep cattle moving with quick turnarounds in order to stay current as they have managed to do this past year. He says early 2018 is expected to be mostly a continuation of 2017, but says as the year progresses, producers will need to start paying more attention to demand and managing their risk, will be very important. Especially, during the second half of the year.

In looking at the overall size of the herd, Peel considered the 12 percent increase in heifer slaughter and the 10 percent increase in beef cow slaughter - and offered his final thoughts on the actual impact of this report, given the timing of its release just before the Christmas holiday.

"Both of those are indicative of a slowdown in herd expansion, but I don't believe they indicate liquidation," he said. "I'm looking at for the herd, January 1, 2018 to be up somewhere in the range of 1.5 to 2 percent year-over-year from January of 2017.

"The report will certainly be viewed negatively. But, it came out just before Christmas, so a lot of traders really were in Holiday Mode, which may mute it a little bit. By the time they get back and have a little time to think about it, there may be a little less reaction than you might expect."

Click here to see the USDA's December 2017 Cattle on Feed report, for yourself.



Listen to Derrell Peel and Ron Hays discuss the numbers in the latest Cattle on Feed report, below.
right-click to download mp3


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