May 2012 Articles

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Red Ink causes Feedlot Placements to Decline

RED INK CAUSES FEEDLOT PLACEMENTS DECLINE:
USDA-NASS released the data for the number of cattle on-feed as of April 1 and data for March on marketings and placements of cattle into feedlots. Overall, the report was about as expected with the number of cattle in the monthly reported feedlots (those over 1,000 head one-time capacity) up 2% and marketings down 4%. Placements were 6% below a year ago, recording a year-on-year decline driven by two factors: 1) declining feeder cattle supplies due to shrinking U.S. calf crops in recent years and 2) red ink on most feedlot closeouts with projected breakeven sale prices for cattle entering feedlots also deep in the red.
Placements during March were above a year ago in the heavy-weight category (animals weighing over 800 pounds). The only state with a surprising year-over-year increase in feedlot placements in March was Nebraska (up 13% from 2011’s). Also, Nebraska placed 50,000 head more than a year ago in that heavy-weight category, while all other states were down significantly. Further, Nebraska reported rather large increases in the other disappearance category collected by USDA. In Nebraska it appears that animals previously reported as on-feed may have been in "backgrounding" or grow-lot situations. If those animals were transferred or sold in March they would be accounted for in both placements and in other disappearance. Without that Nebraska situation, national feedlot placements would have been smaller, but the on-feed inventory unchanged from what was reported.
Based on starting with a 750-pound steer, the LMIC estimated that closeouts in March lost over $125.00 per head. Further, the estimated breakeven sale price for a 750-pound steer placed in March was 137.00 per cwt., well below futures market price levels. Red ink and tight feeder cattle supplies suggest another year-on-year decline in feedlot placements in April.
Source: Livestock Marketing Information Center (www.lmic.info