March 2012 Articles

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Market Situation and Outlook - Adjustments will Continue in Cattle Feeding

Market Situation and Outlook– Adjustments will Continue in Cattle Feeding Source: UofA Drilling down into the USDA-NASS Cattle report released in late January from a cattle feeding perspective, two key factors emerge. First, the calculated feeder cattle supplies shrunk dramatically. Second, small feedlots reduced their role in the cattle industry. Further downsizing of the U.S. cattle feeding sector is expected in 2012 and both small and large feedlots will likely have fewer cattle on-feed than in 2011. The calculated national number of cattle outside feedlots that are not designated as part of breeding herd is commonly referred as the feeder cattle supply. As of January 1, 2012, the feeder cattle supply was 25.8 million head, down over 1 million head or nearly 4% below a year ago. That statistic will continue to decline in 2012 due to a smaller calf crop and likely significant reductions in the number of Mexican feeder cattle imported by the U.S. Note that U.S. imports of Mexican feeder cattle in 2011 were bolstered by drought in Mexico. One of the least noticed statistics in the USDA’s January 1 Cattle report is the number of all cattle on-feed nationally. That number showed an important downsizing. Many market watchers have been confused by why the monthly USDA Cattle on Feed reports have shown large year-over-year increases. Even grain market analysts have been puzzled by why more feedstuffs have not been used. As of January 1, 2012, the monthly Cattle on Feed report showed that there were 3% more animals on-feed than a year ago. However, that report only includes feedlots with at least 1,000 head one-time capacity. The number of cattle on-feed in all U.S. feedlots is estimated just twice each year. As of January 1, all feedlots only had 1% more cattle on-feed. So, the unreported monthly feedlots had about 240,000 head less being fed or a decline of nearly 10%. That is an important structural change and reflects smaller operations selling rather than feeding their corn. The statistics described above show tight supplies and indicate high cattle prices. Those same statistics suggest weak margins for many firms in the marketing chain. This year will likely be one of transition toward building-up U.S. beef cowherd numbers and one of downsizing by the feedlots and beef packers. Source:Livestock Marketing Information Center