The latest numbers from the June Cattle on Feed report had no surprises as the trend of fewer cattle in feedlots continues.
By: Darrell Mark, SDSU Economics Adjunct Professor
USDA released its monthly Cattle on Feed report last Friday. The inventory, marketing, and placements figures were close to pre-release expectations, offering few surprises. According to the report, there were 10.594 million head of cattle on feed in feedyards with more than 1,000 head capacities on June 1, 2014 (Table 1). That is 1.6% less than a year ago, but very close to the average pre-release expectation. USDA indicated that feedyards marketed 1.865 million head of cattle for slaughter in May 2014, 4.3% lower than in May 2013 (Table 1). Again, that was on par with pre-release expectations. It was also close to the 5% year-over-year reduction in federally inspected steer and heifer slaughter. Although lower marketings resulted from the shrinking cattle on feed inventory and are the smallest marketings for May since the data series began in 1996, marketings on a daily basis have been fairly resilient. Since May 2014 had one less business day than May 2013, average daily marketings during May this year were actually fractionally higher than a year ago. Clearly, cattle feeders have marketed cattle as quickly as possible to take advantage of very high slaughter cattle prices.
Feedyards placed 1.912 million head of cattle on feed during May 2014 (Table 1). That is 7% lower than a year ago and close to pre-release expectations. While the range in expectations for placements during the last several cattle on feed reports as been rather large, note that the spread between the high and low estimate differed by only five percentage points this month. At this point, the market is more assured of the shrinking cattle supply and difficulty cattle feeders have in continually trying to pull placements forward. Further, heifer retention has caused fewer heifers to be placed on feed. Still, cattle feeders placed 10% more calves weighing less than 600 lb during May this year. That observation, though, is somewhat skewed by the fact that lightweight placements in May 2013 were down sharply. Actually, May 2014 placements of feeders weighing less than 600 lb is on pace with the five-year average for the month of May. Placements of feeder cattle weighing 600-699 lb were down 6.5%. Placements of cattle weighing 700-799 lb and over 800 lb were down 14.1% and 10.7%, respectively. While placements were down rather sharply for the heavier weight categories, this compares to higher placements a year ago driven by retained heifers being culled for breeding and sent into feedyards.
While the national trend in cattle on feed numbers has been lower throughout the year, South Dakota has averaged 4.1% more cattle on feed since the beginning of the year. As of June 1, 2014, the state’s cattle on feed inventory was 225,000 head (in feedyards with more than 1,000 head capacities). That is 4.7% more than a year ago. Some of this year-over-year increase in South Dakota’s cattle on feed inventory is a function of relatively cheaper feeding cost of gain. However, it is also a result of comparing to sharply lower on feed numbers in 2013. Still, this year’s on feed inventory for South Dakota has averaged less than 2% below the five-year average while the U.S. is 3.5% lower than average. This trend that has emerged this year in South Dakota may come to an end, however, as South Dakota placements during May were 12.8% below a year ago – larger than the U.S. average.
Overall, the reaction to last week’s Cattle on Feed report is expected to be very limited. It confirmed expectations for lower placements, which is a trend likely to continue through the summer months.
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