In the Cattle Markets: Drought Affects Cattle on Feed

US - Last Friday, USDA released the monthly Cattle on Feed (COF) report, and the numbers clearly show the effect of this year’s drought, writes John D. Anderson, Deputy Chief Economist for the American Farm Bureau Federation.
calendar icon 26 September 2012
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As Jim Robb noted in last week’s ICM, August placements generally reflect the beginning of the fall run of seasonally above-average placements. That effect this year has been substantially muted by the relatively large drought-induced placements in July. In the ten years from 2001 through 2010, placements increased by almost 21% between July and August, on average.

The smallest July-to-August increase in that time period was 11% in 2001. Last year with the Southern Plains drought forcing calves into feedlots earlier than normal, placements only increased by a little more than 5% between July and August. This year, the July-to-August increase in placements was even smaller – just 4.2%. USDA noted that this is the second smallest August placement figure since the current COF series was started in 1996.

The weight breakdown of placements this year was considerably different than last year. In 2011, a large slug of lightweight calves was in the placement mix. That was not the case this year. Calves weighing less than 600 pounds made up about 24% of all August placements this year. That compares to a bit under 23% on average over 2006 through 2010. By contrast, in 2011, calves under 600 pounds constituted almost 32% of August placements.

Last year’s numbers likely reflected more early-weaned calves from Texas and Oklahoma than this year. Also, last year there was in August virtually zero available forage in the Southern Plains or even most of the Southeast and little hope that any would be forthcoming, as conditions were deteriorating throughout the month. This year was notably better over most of Texas and much of the Southeast so that the idea of finding a place on grass for lighter stock – immediately or at least within a few weeks time – did not seem completely hopeless.

The COF’s bullish news on placements was blunted by bearish news on marketings. August marketings were considerably lower than expected – below even the most pessimistic pre-report forecasts.

Marketings were down 4.5% from a year ago. Despite soaring feed costs, marketings in August did not look terribly aggressive. This comports with data in last week’s Livestock Slaughter report, which showed an 18-pound increase in steer dressed weights for this August compared with a year ago.

Despite the slower pace of marketings, the total on-feed number was about in line with expectations: down just a touch year-over-year. On balance then, the marketing figure may keep some pressure on front-month futures, but the overall story coming out of the COF is still one of further tightening of cattle and beef supplies.

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