August Cattle on Feed Recap

USDA released their monthly Cattle on Feed report on August 17. The report revealed that 10.656 million head of cattle were in feedlots with 1,000 head or larger capacity on August 1, an increase of 0.7% from the same month last year. This was exactly what the average of ten analyst had expected prior to the report.

Placements into feedlots during the month of July dropped 10.0% from last year’s number, totaling 1.922 million head. Analysts expected placements to drop 8.6% versus last year, so the report shows less cattle were placed than expected. In July 2011, placements into feedlots marked the highest number of cattle placed since this report started in 1996. So, while a 10% decline from July 2011 is significant, it needs to be kept in context. The average number of cattle placed in July from 2006-2010 was 1.755 million head meaning this year’s number is on the high side. Still, with the widespread drought forcing further liquidation the fact that placements during July did not rival those in 2012 should be viewed in a positive light.

Placements by state and weight group highlight the difference from last year to now. Texas placements were down sharply from last year across all weight groups except 700-799 pound feeders. Given that last year’s drought was much more targeted in that region of the U.S. it is not surprising. Kansas was on the fringe of last year’s drought and experienced a similar decline in placements from one year ago. Cattle numbers in the Southern Plains took a hit last year, so even in the face of continued dry conditions, less are available to liquidate this year. On the other hand, Nebraska placements are sharply higher compared to July 2011 for light and heavy cattle, indicating the impact of this year’s more widespread drought.

Marketings during the month of July were slightly less than last year at 1.913 million head, 0.3% below July 2011. Pre-report expectations looked for these to be 1.6% higher than last year and the actual reported value was on the lower end of the expectations. The extreme heat that has encompased most of the U.S. this year is believed to have tempered grilling demand since most sane consumers preferred to not be standing next to a 300+ degree grill. Of course, beef enthusiast (a.k.a., myself) persevered and indulged despite the heat.

Like last month’s report, this will likely be viewed as mildly bullish. Cattle market participants will probably be keying in on other indicators like feed prices, drought conditions and demand. The surge in boxed beef prices this past week will help. The next questions that will be answered in the coming months is will Labor Day beef purchases show resiliency, how many cattle will be liquidated due to the drought and how much corn will end up in the bin?

Summary of the report:

Pre-report Estimates:
(1,000 head) % of 2011 Average Range
Placed during Jul 1,922 90.0% 91.4% 86.7% 99.0%
Marketed during Jul 1,913 99.7% 101.6% 99.6% 104.0%
On Feed, Aug 1 10,656 100.7% 100.7% 99.6% 101.5%

Placements by weight group and state:

Weight Group Kansas Nebraska Texas US Total
<600 -10.5% 16.7% -25.0% -19.4%
600-699 -8.7% 0.0% -39.3% -18.8%
700-799 -5.3% -10.0% 5.3% -5.1%
800+ -5.6% 12.5% -31.6% 1.1%

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