Cattle on Feed up in Nebraska Down Nationally
May 31, 2012
The fallback from last year’s drought is starting to hit the market, as reported in the USDA’s Cattle on Feed report released on May 18. For the first time in two years, the on-feed count was below that of the previous year.
“Cattle and calves on feed for slaughter market in the United States for feedlots with capacity of 1,000 or more head totaled 11.1 million head on May 1, 2012. The inventory was 1 percent below May 1, 2011,” according to the report.
The biggest drop was seen in the placements of new cattle in the feedyard. “Placements in feedlots during April totaled 1.52 million, 15 percent below 2011. Net placements were 1.44 million head. During April, placements of cattle and calves weighing less than 600 pounds were 355,000, 600-699 pounds were 250,000, 700-799 pounds were 380,000, and 800 pounds and greater were 536,000,” the report stated.
However, the number of cattle on feed in Nebraska actually increased four percent compared to last year, but decreased three percent compared to the previous month. The placements matched those from last year, but were down 16 percent compared to the previous month.
“This is the normal seasonal pattern. Right now we are working through a fairly plentiful supply of fed cattle. That is the case every year in late May and early June in Nebraska. There are a lot of calves that are weaned in October, and are market ready this time of year. The overall pattern as far as in Nebraska is very normal,” said Jeff Stolle, Vice President of Marketing with the Nebraska Cattlemen.
The 15 percent national drop in placements can be attributed to the drought last year, when cattle were placed on feed earlier than normal due to drying pastureland, according to Stolle.
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“As expected, placements of cattle into feedlots were below a year ago during April, down 15 percent. The average of pre-report estimates indicated a 12 percent drop. The year-on-year decline was due to: 1) large numbers forced into feedlots last year because of drought; 2) huge red ink on feedlot closeouts and no opportunity in April to lock-in anything close to a breakeven sales price for purchased feeder cattle using risk-management tools; and 3) shrinking cattle supplies. Head placed in all weight categories were below a year ago, with the lightweight category (under 600-pound) down 20 percent,” according to James Robb, Center Director for the Livestock Marketing Information Center, in his In The Cattle Markets review dated May 21.
The USDA reports shows that placements in Texas were down 18 percent, placements in Oklahoma were down 38 percent, placements in Kansas were down 21 percent, placements in California were down 21 percent and placements in Colorado were down 27 percent, all compared to the previous year.
Every state that feeds cattle was down in placements compared to the previous month as well, with the biggest drop in South Dakota at 29 percent. However, the state showed a three percent increase compared to last year.
In terms of the number of cattle marketed, Nebraska saw a 14 percent increase in the number of cattle marketed compared to last year, but a 9 percent decrease from the previous month.
“Marketings during April were larger than pre-report estimates (including those of the LMIC), as has often been the situation in recent months. Analysts expected marketings below a year ago (down about 1.5 percent), but producers reported to USDA numbers slightly above a year ago. Marketings in the report historically track rather well with steer and heifer slaughter, after making adjustments for the number of Canadian animals imported directly for harvest. In fact, USDA figures put steer and heifer slaughter for the month of April at 4.5 percent below 2011’s,” according to Robb.
Exports remain a huge driver for the demand of U.S. beef. “Export demand is excellent and that’s a big part of the picture, and has allowed us to keep the price high. If the U.S. dollar continues to trade at relatively weak levels compared to other foreign currencies, that demand should hold in pretty well. The weaker the dollar, the more they get for their currency,” said Stolle.
The price of cattle has remained high, but increasing input costs will affect feeders in the near future. “The last year or so has been pretty good. That said, there are cattle in feedyards now that if price levels do not increase a good bit between now and July and August, they will not break even at these price levels because of the high price of inputs,” he said.
He continued, “It should pressure the demand for feeder cattle some, but in all honesty, there is more feeding capacity, more bunk space then there are calves and yearlings to fill it at this time. Under those circumstances, you will not see the pressure on feeder cattle prices because there are not enough.”
The issue with increasing input costs and high feeder and yearling cattle prices will force some feedyards to lose money on the cattle they are feeding right now.
“Corn prices won’t come down fast enough to change the fact that their could be negative returns for the next 30 to 100 days because those cattle have already been on feed for a long amount of time. There is already high priced corn in those cattle. The only thing that would help those feeders is if the price goes up,” Stolle said.
Overall, Nebraska is in good shape. “I think we are well positioned as a state from a competitive standpoints. We have abundant feedstuffs, and abundant ground water. We have a vibrant ethanol industry that produces byproducts that are popular feeds. I think we are in good position compared to other states,” he said.
Although the price for cattle in the coming months cannot be predicted, the futures price does give some insight.
“In terms of futures market prices for fed cattle, the lows have most likely already been set for this year. The June contract rebounded this past week. As has been the case for some time now, steer and heifer slaughter will be smaller than a cursory view of the report indicates. Based on recent trends and the May 1 number of cattle on-feed in the 1,000 head and larger feedlots at 1 percent below a year ago, steer and heifer slaughter in several coming months down at least 3 percent would be consistent,” according to Robb.
The outlook for the cattle industry will continue to depend on drought. Although conditions have continued to improve in many areas of Texas, Oklahoma and the Northern Corn Belt, Florida, Georgia, South Carolina and Alabama are seeing worsening conditions.