Cattle & Corn Comments -  January 28, 2013 Back »

Surprises in the January Cattle on Feed Report

According to USDA, cattle feedyard operations with more than 1,000 head capacities marketed 1.745 million head in December 2012, 1.7% less than a year ago (Table 1). However, that is about 5 percentage points, or 90,000 head, higher than the average of pre-release expectations. And, because December 2012 had one less slaughter day than December 2011, average daily marketings were actually 3.2% higher than a year ago. It is difficult to reconcile the less than 2% decline in December gross marketings with steer and heifer slaughter in December, which was down 7.7% from a year ago. One possibility is a very large year-over-year reduction in cattle from feedyards with less than 1,000 head capacities (which is not included in the monthly Cattle on Feed report) being slaughtered in December. While that likely occurred to some extent, it isn’t probable that that the year-over-year reduction could be large enough given the trend towards fewer cattle being fed in these small feedyards has existed for some time. 

Another bullish surprise in last week’s Cattle on Feed report was lower placements in December 2012 versus December 2011. As Table 1 shows, analysts on average expected a 4% increase in December placements, and only one expected a reduction relative to a year ago. The 1.664 million head placements figure represents a decline of about 9,000 head compared to December 2011 but 78,000 head less than expected for the month. Similar to previous months, placements of feeder cattle weighing less than 600 pounds had the largest (10%) reduction.  Placements weighing 600-699 pounds and 700-799 pounds were up 7.8% and 5.3%, respectively, while 800+ pound placements were steady compared to a year ago. Notably the two middle weight categories saw relatively large year-over-year reductions last fall while placements of the heaviest feeder cattle increased the most (or decreased the least). The placements data in this most-recent Cattle on Feed report suggest that supplies of 800+ pound feeder steers and heifers are dwindling and cattle feeders are shifting towards 600-800 pound placements. In fact, the proportion of total placements in this weight category was higher in December 2012 than in November 2012 and December 2011.

Most expectations going into the Cattle on Feed report were for higher December placements, driven by the idea that cattle feeders were ‘pulling ahead’ feeder cattle placements due to historically tight feeder cattle supplies. Further, the very poor condition of wheat pasture in the Southern Plains was expected to spur an increase in placements, particularly for light-weight cattle. And, that does appear to have occurred as placements in Oklahoma, Texas, and Kansas were up 16%, 4%, and 4%, respectively. However, sizeable declines in Colorado (-13%), California (-18%), Idaho (-28%), Washington (-42%), and South Dakota (-8%) offset these placement declines on a national basis. Interestingly, part of the lower December placements were offset by a 19% reduction in ‘other disappearance’ last month. Other disappearance is a small category that includes transfers of cattle out of feedyards other than for slaughter (including to other feedyards, backgrounding or other non-feedyard programs, and death loss). Thus, December net placements (gross placements - other disappearance) were 0.5% higher than a year ago.  While not usually a big factor, other disappearance is likely to be more volatile in the upcoming months as cattle feeders react to excess feeding capacity, tight feeder cattle supplies, and volatile feeding margins.

The higher-than-expected marketings and lower-than-expected placements offset each other to some extent and the January 1, 2013 cattle-on-feed inventory was close to expectations (Table 1).  According to USDA, there were 11.193 million head of cattle in 1,000+ head capacity feedyards on January 1, 2013, 5.6% less than a year ago and 3% less than the 5-year average. Of this total, 63% of the on feed inventory was steers, 36.4% were heifers, and 0.7% were cows and bulls. That’s about a 1.5 percentage-point increase in the proportion of steers on feed and 1.5 percentage points decrease in the proportion of heifers on feed relative to January 1, 2012. This suggests a few more heifers may have been held back at the end of the year for beef cow replacements. This Friday’s annual Cattle Inventory Report will reveal the actual number of such heifers being held for breeding purposes. Expectations are for a 0.5-1.0% increase in beef heifers retained at the beginning of January. However, this small increase in heifer retention will not be enough to offset high beef cow cull rates in 2012, and the beef cow herd is expected to decline 1-2% nationally.  Overall, look for about a 1.5-2.0% decline in the total number of cattle and calves in the U.S. on January 1, 2013 in this Friday’s USDA report. Next week’s Cattle & Corn Comments will feature summary and analysis of this report.

Table 1.

USDA Actual
Pre-Release Expectations
Head (millions)
% of Yr Ago
Placements, December
Marketings, December
On Feed, January 1

The information in this report is believed to be reliable and correct.  However, no guarantee or warranty is provided for its accuracy or completeness. This information is provided exclusively for educational purposes and any action or inaction or decisions made as the result of reading this material is solely the responsibility of readers.  The author and South Dakota State University disclaim any responsibility for loss associated with the use of this information.  There is substantial risk of loss in trading commodity futures contracts and traders should consult their brokers for a full disclosure of these risks to determine whether such trading is suitable for them in light of their circumstances and financial resources.

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