A beef supply surge could be headed towards cold storage.
The buildup is likely to come because of higher feedlot placements in the spring, says Rich Nelson, chief strategist with Allendale, Inc.
March feedlot placements were up 5% from 2015 with a total of 1.89 million head of cattle entering feedlots. The trend continued to increase with April placements up 7% and May rising by 10% compared to 2015.
The latest USDA Cattle on Feed reports have shown the placement numbers slowing down with June increasing just 3% and July up 2% from the previous year.
“Keep in mind we’re going to have a contra-seasonal issue in the beef industry,” Nelson adds.
Weekly kills have been approximately 579,000 head during August, but by mid-September it should rise to the 621,000 head level.
Beef cold storage was up 2% to end July compared to last year, according to USDA. Cold storage was also up 2% from the previous month with more than 460 million lb. in warehouses.
Nelson doesn’t expect the increased beef supply to impact consumer beef prices. However, he believes live cattle should fall.
Estimates from Allendale project cash cattle to fall to $108/cwt this month.
It may be challenging for cow-calf producers selling calves in the coming months, says Nelson.
The prospects for a bull market aren’t looking likely with the current expansion situation in poultry and pork.
“On the good news side, producers have started to cut back already. Cow slaughter is up and we’re putting these open heifers in feedlots,” Nelson says. “The downside, it won’t help us until 2018.”