September 10, 2013
US cattle on feed down in August
USDA''s monthly Cattle on Feed report released on August 23 revealed that there were 10 million head of cattle on feed in US feed yards with greater than 1,000 head capacities on August 1.
Darrell Mark, professor of economics at South Dakota State University said, "That is almost 6% below a year ago and below industry expectations. Although this is the 12th consecutive month of over-year declines in the on feed inventory, the August 1 drop likely marks the beginning of several months of sharply lower cattle on feed numbers."
During July, cattle feeders marketed two million head of cattle, or about 4.5% more than in the same month of 2012. This increase, which contributed to the lower cattle on feed inventory on August 1, was relatively close to pre-release expectations.
The steady marketings along with the declining number of cattleon feed has resulted in marketings as a percentage of the number of cattle on feed to increase to 19.3%, which Mark says is up from 17.9% a year ago and the highest marketings pace yet for 2013.
Mark said marketings, as a percentage of cattle on feed, have generally been higher this year as a function of cattle feeders placing more heavy yearlings on feed and fewer calves, thus shortening the number of days on feed that cattle are fed.
That trend towards placing proportionally heavier feeder cattle and fewer lighter cattle on feed continued in July. Cattle feeders placed about 665,000 feeder cattle weighing less than 700 pounds during July, which was 160,000 head or almost 20% less than last year.
Mark added that cattle feeders placed 1.057 million feeder cattle weighing more than 700 pounds in July, down only 40,000 head or 4% from last year. Still, total placements sharply declined in July. USDA reported that cattle feeders placed only 1.722 million head, which was down 10.4% from last year and well below industry expectations.
"Of note, July 2012 placements were down sharply, as well. So July 2013 placements were down nearly 20% compared to July 2011 and almost 8% below the five-year average. In addition to high feed costs last month limiting placements this July, sharp reductions in feeder cattle imports from Mexico contributed to about a fifth of the decline in placements this year," Mark said.
"Continued reductions in cattle on feed numbers could help push slaughter cattle prices to US$130 per hundredweight or slightly higher by year''s end. However, higher placements of calves this fall- if new crop corn prices remain low- could put more pressure on fed prices late next spring and early summer," he said.
Overall, Mark said the market reaction to the sharply lower placements, lower cattle on feed inventory and steady average daily marketings figures was bullish. The numbers provide the most support for improved fed cattle prices in the November 2013 to February 2014 timeframe.