August Brings Seasonal Rise in Feedlot Placements

US - This Friday (September 21st), USDA’s National Agricultural Statistics Service will release the monthly Cattle on Feed report. The report will be an important barometer for the beef industry because it will provide insight on how three forces are shaking-out: drought, smaller calf crops, and huge red ink on recent feedlot closeouts.
calendar icon 20 September 2012
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Market analysts will be focusing on what USDA reports as placements or the number of animals entering feedlots. Placements of cattle into feedlots are highly seasonal and August is a normal transition month.

In most years, August marks the beginning of a ramp-up in cattle entering feedlots with October being the peak month. In the 5-year period from 2006 through 2010, monthly placements in the first seven months of the year tended to be below average and August was 13 per cent above the average. In September and October placements were 23 per cent and 31 per cent over the annual average, respectively. Last year, because of the Southern Plains drought, feedlot placements jumped above average one month earlier than normal in July. Still, even during last year’s drought placements generally followed the normal season, including peaking in October.

Much of the seasonality in placements is driven by animals under 700-pounds, almost all of which are calves. October is by far the major month when animals are placed weighing under 700-pounds. As with overall placements, August is the first month of the calendar year that is normally above average in terms of cattle placed at relatively light weights. Relatively heavy weight cattle tend to enter feedlots year-round. For those cattle, September is the peak placement month and August is still a well above average month.

How large placements are this year in August will be an important yardstick for the next few months. Did drought this year result in larger placements than the drought of 2011? Will the smaller calf crops that were produced both this year and last year show-up in the numbers for August? Most analysts are expecting the report to show a nationwide year-on-year decline in placements.

Regionally, August placements may be quite different than a year ago, similar to the situation of recent months. Expectations are that placements in the Southern Plains will be below the drought induced surge of a year ago. But placements in the Northern Plains could be bolstered by 2012’s drought.

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