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Feedlots Expected to Be Down 6 Per Cent

23 January 2014

US - Feedlot capacity expectations at the start of the year are for a 6 per cent drop compared to 2013, report Len Steiner and Dr Steve Meyer.

USDA will release on Friday, January 24, the results of its monthly survey of feedlots with capacity of +1000 head. With fed cattle prices at all time record highs, there is plenty of anticipation ahead of the survey results. As always, the critical number is the number of cattle placed on feed in December. Feeder cattle supplies remain limited and feedlots were quite aggressive during the fall months.

For the period Sep - Nov,cattle placements actually increased by 58,000 head, or 2.6 per cent , compared to the previous year. That kind of increase is not sustainable and placement numbers are expected to stay low for the next few months.

A small calf crop in 2012 and 2013 and a growing impetus to expand the herd will tend to limit the number of cattle available for placement this year and very likely next year as well. A survey of analysts conducted by Dow Jones ahead of the report indicated that total on feed supplies as of January 1 are expected to be down 6 per cent compared to the previous year.

Analysts on average expect placements to be down 1.9 per cent but there is a very wide range of opinions on this matter. Of the 11 analysts polled, three of them pegged placements to increase compared to the previous year while two analysts thought placements could be down by more than 5 per cent . One thing to keep in mind is that placements in December are some of the lowest in the year.

A five percent change in placements compared to 2012 would represent about 83,000 head. One factor that is important in this regard is the number of feeder cattle coming from both Mexico and Canada. Imports of Canadian feeder cattle have increased sharply in the last couple of months. Total imports of Canadian feeder cattle for the period Dec 1 - Dec 28 were 39,786 head, up some 35,578 head compared to the very minimal numbers bought last year.

Imports from Mexico were also up during this period, with total imports pegged at 145,580 head, 18,136 head (+14 per cent ) compared to the same period a year ago. Combined imports of Mexico and Canadian feeder cattle during the four full December weeks were up almost 54,000 head.

Given the normally small placement numbers for December, this kind of increase in imports will likely offset some of the expected decline in domestic numbers. Lower feed costs and relatively high forward prices for fed cattle certainly provided an incentive for feedlots to place more cattle in December.

Marketings in the last quarter of the year were actually quite strong and feedlots likely had plenty of space and generally a positive margin outlook. The incentive was certainly there to chase feeders. The rally in feeder prices in December certainly points to that as well. Cattle marketings in December are currently expected to show a 2.2 per cent increase compared to the previous year.

This is a number when usually there is good agreement but analysts this time appear quite far apart on this as well. Two analysts actually are indicating that they expect marketings to be down by 2 per cent or more compared to the previous year. There is was one more marketing day in December 2013 compared to December 2012 so that should cause numbers to be higher even as daily slaughter was modestly lower in December.

It is always a factor to consider when looking at monthly totals. Based on daily USDA slaughter figures, we calculate that steer/heifer slaughter for December at 1.964 million head, up 3.3 per cent from the previous year. Bottom line: Feedlot supplies are tight.

Current supplies of market ready cattle are even tighter as feeders placed a few months ago were heavier and were marketed earlier in the marketing window. The January survey will help us gauge how the supply picture looks for late spring and early summer.


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