November 2010 Articles

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Cattle on feed Report and Summer cattle markets

Cattle on Feed Report and Summer Cattle Markets
Derrell S. Peel, Oklahoma State University Extension Livestock Marketing Specialist
The June USDA Cattle on Feed report showed large placements and growing feedlot inventories. The report did include, as expected, a large May placement number, up 23 percent from May of 2009. It is important to remember that this value is being compared to a very small value one year ago. In fact, the current value as a percent of the five year average from 2004-2008 is down about 4 percent. The point is not to read too much into this placement value. It does mean some things but maybe not everything it suggests. The May marketings value was slightly smaller than last year and was about as expected. There are several reasons why May placements, like April, showed an increase after many months of decreases. That is in fact one of the reason for larger placements. Feedlots have been reducing feedlot inventories for many months in the face of economic losses and were anxious to rebuild feedlot inventories following a couple of months of better closeouts. The wheat market also played a role as the deteriorating wheat price this spring encouraged late purchases of wheat stockers and additional wheat grazeout that carried cattle into May. Moreover, the strengthening of feeder prices this spring encouraged producers to hold stockers and retained calves into May. After two months of larger placements, we will likely see slower placements until summer grazing cattle are available in the fall. Large placements does not mean that we have more cattle in general. It simply means that we have changed the timing somewhat. It may suggest some bunching of feedlot cattle later in the year but not an inevitable fed cattle market problem. The fact is that beef production is still down for the year and carcass weights continue to run roughly 15 pounds below a year ago. We will continue to see seasonal pressure on fed prices until Labor Day with recovery expected in the fourth quarter. Just how low summer prices will go and how much recovery can be expected in the fourth quarter depends on demand. Boxed beef has dropped sharply the last month but appears to be stabilizing at the current time. If it holds near current levels, there is not a lot of pressure for fed prices to drop much further. Feeder cattle prices are holding steady with some slight counter seasonal increases noted recently. Good forage conditions along with good corn crop conditions are providing support for feeder markets.