Cattle on Feed Report Is Promising

Feedlot placements surge, cattle on feed inventory inches up, freezers bulge with frozen beef and pork stocks up 14% and 16%, respectively

Published on: Jun 22, 2012

On the surface, smaller than expected May fed cattle marketings in Friday's USDA Cattle on Feed Report could be construed as a bit bearish. The reason--cattle that were expected to already be beef in the cooler were still on feed June 1. Despite that concern, fed cattle futures inched higher after the report.

May marketings totaled 2.02 million, up just 0.6% from 2011. Analysts expected marketings to be up about 5%.

The smaller than expected marketings resulted in a slightly larger June 1 on-feed inventory than traders expected. USDA tallied 11.1 million cattle in lots June 1, up 1.7% from a year ago. On average, traders expected the feedlot inventory to be up 0.7%.

Feedlot placements surge, cattle on feed inventory inches up, freezers bulge with frozen beef and pork stocks up 14% and 16%, respectively
Feedlot placements surge, cattle on feed inventory inches up, freezers bulge with frozen beef and pork stocks up 14% and 16%, respectively

Placements in feedlots during May totaled 2.09 million, 15% above 2011. Net placements were 1.99 million head. May placements of all weight groups were higher than a year ago.

Ample reasons for higher placements. March 2012 placements were down 6.4% and April placements were down 14.8% as "cheap" wheat and "high" cattle prices lured calf owners to keep cattle on grazing longer. The larger May placements reflect feeders that otherwise would have gone into feedlots earlier.

Last May, ranchers who faced a severe drought in the Southern Plains rushed animals off pastures early in the year and so had fewer of them to sell in May. The result, this year's May placements are compared to a low year-ago base.

More feeder cattle are coming from Mexico and Canada, especially Mexico, as drought in Mexico's Northern States has pushed more feeders into U.S. feedlots, especially in Texas.


Cattle on Feed Report Is Promising


May 2012 had one more work day than last year.

A developing drought in the northern Plains this year is forcing young animals off shriveling pastures. Conditions across much of the Northern and Western U.S. continue to deteriorate. In Wyoming, for example, 59% of pastures are in poor or very poor conditions, according to USDA. Last year at the same time, only 4% of Wyoming pastures were stressed. In Missouri, the numbers are 47% and 4%, respectively.

The uptick in placements likely will not last long. The ever-shrinking calf crop and the incentive to expand cow herds where possible will likely limit the number of heifer calves coming to market.

Deteriorating pastures are a worry. Grazing conditions again hold the key to pace at which feeders move into feedlots.

Cattle on Feed Report Is Promising

Cold storage stocks up. Total red meat supplies in freezers on May 31, 2012 were down 4% from the previous month, but up 14% from last year.

Total pounds of beef in freezers were down 4% from the previous month but up 11 percent from last year.

Frozen pork supplies were down 4% from the previous month but up 16% from last year. Stocks of pork bellies were down 13% from last month but up 14% from last year.