OSU's Derrell Peel Says Latest Cattle on Feed Report Indicates We're Back on TrackFri, 19 Jun 2020 16:54:52 CDT
The latest USDA Cattle on Feed report indicates the industry is almost back on track after suffering through months of the coronavirus impact, says Dr. Derrell Peel, OSU Extension livestock market economist. Peel digested and analyzed the report during a late Friday interview with Radio Oklahoma Ag Network Farm Director Ron Hays.
Peel said the June report showed placements in May are about 99 percent of year ago, Peel said, and marketings in May are about 72 percent of year ago numbers.
The total number of cattle on feed was just down fractionally from a year ago.
Peel said this is about what he expected going into the report.
He said it is Important to keep in mind that the month of May had two less business days than a year ago so that could slew the numbers slightly.
With basically flat placements we are back on track, Peel said.
He noted the cattle are still out there as we have just been moving them around.
The two months of low placements ahead of this report will give us a chance to catch up, Peel said.
The marketing numbers are way under a year ago and we have been watching the slaughter capacity slowly return to normal. Marketings were the lowest for May since the reports began in 1996 and that is mainly due to the impact from Covid-19.
The backlog of cattle lead to heavier carcass weights as cattle waited to be processed. Peel said this has also impacted how you should look at the slaughter numbers.
If you use last year’s carcass weights you can add 3 or 4 percent to the slaughter total, Peel said. We’re effectively slaughtering more cattle each day than a year ago because of the added weights.
The OSU economist said we are starting to see a reversal of the market situation we faced earlier in the spring.
In April and May we had shortages of beef in the market but we’re going to go into a situation now where we will see relatively more supplies to put pressure on the market.
Peel said we’ve got a huge backlog of cattle and we will have an imbalance of supply and demand for many more weeks and that will keep pressure on fed cattle prices
We may see boxed beef prices go somewhat lower yet, Peel said.
Profitability for producers? Maybe, Peel said.
There could be some chances for profits, Peel said, but it is no guarantee.
The heavier feeder cattle market is going to continue to struggle as there is just limited space in the feedlots until we get caught up, Peel said.
We have very favorable feed costs so cost of gain is going to be attractive, he added.
He said the calf market this fall could bounce back as there is potential for year ago levels, but no guarantee.
Peel suggested producers should just “hunker down” and just get through the year.
The biggest question for everyone is the longer-term impacts of the recession we’re in now as it could soften beef demand, Peel said.
I think there is a good chance we’re going to finish 2020 on the defensive, Peel said.
The OSU specialist said survival should be top priority for producers.
The first question, are there threats to survival, then try to maintain a position to help recover quickly, he said.
At this point you must be very flexible and be prepared to react to whatever the situation is in the coming months.
To hear more of Ron’s interview with Dr. Peel, click on the listen bar below.
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