December Cattle on Feed Report Commentary

USDA released their monthly Cattle on Feed report this Friday afternoon (Dec 21). The report revealed that 11.328 million head of cattle were in feedlots with 1,000 head capacity or greater on Dec 1. This was a 6% decline from Dec 2011 and 3% below the five-year average. Pre-report expectations were looking for a 6.6% drop from the previous year and above the high end of the range (based on a tight range of expectation).

Placements during November were 5.6% lower than 2011 and 3.7% below the five-year average at 1.923 million head. This number was well above expectations of an 8.8% decline and outside the high end of the range (-6.6%). When assessing placements by weight, most states saw a decline across all weights under 800 pounds with the exception of Texas, which was higher in all weight categories over 600 pounds. Given the cost of gain, holding cattle outside of feedlots for an extended period of time is likely the more economical option and this is apparent in the recent report. With respect to Texas, November 2011 placements had been decimated by strong placements in earlier months as a result of their severe drought. When compared to it’s five-year average across weight groups over 600 pounds, Texas’ placements are lower by -36%, -50%, and -38%, respectively for 600-699 lbs, 700-799 lbs, and 800+ lbs groups.

Marketings in November were 0.7% below a year ago at 1.774 million head but were 3.6% higher than the five-year average. The volume of marketings was smaller than expected but within range.

The heavier pace of placements, which added more head to feedlots inventories than was expected, will not be viewed positively. Tight supplies have been priced into the market and fairly steady demand that has been experienced in light of high prices at the beef case was helping to prop up prices. With the added amount of cattle that will be marketed in four to six months (likely on the short end since most were heavy weight placements) prices in late Spring and Summer will suffer in the holiday shortened week ahead.

Report Summary:

        Pre-report Estimates:
  (1,000 head) vs. 2011 vs. 5-Yr Avg Average Range
Placed in Nov 1,923 -5.6% -3.7% -8.8% -11.5% -6.6%
Marketed in Nov 1,774 -0.7% 3.6% 0.2% -1.8% 1.5%
On Feed, Dec 1 11,328 -6.0% -3.0% -6.6% -7.2% -6.2%

Placements by state and weight group:

< 600 lbs. N/A N/A -27.3% N/A N/A -17.6% -7.7%
600-699 lbs. N/A N/A 0.0% N/A N/A -10.0% -11.1%
700-799 lbs. N/A N/A 0.0% N/A N/A -12.5% -5.9%
800+ lbs. N/A N/A -20.0% N/A N/A 28.6% 11.5%
TOTAL 3.7% -1.5% -14.3% -13.0% -14.0% -5.3% -3.1%
  OK SD TX WA Other [1] U.S.  
< 600 lbs. N/A N/A -14.8% N/A -11.9% -14.0%  
600-699 lbs. N/A N/A 5.0% N/A -24.0% -10.0%  
700-799 lbs. N/A N/A 33.3% N/A -2.4% -0.5%  
800+ lbs. N/A N/A 25.0% N/A 6.7% 10.5%  
TOTAL -6.7% -18.6% -1.1% 5.6% -12.7% -5.6%  
[1] Individual weight categories include states that are N/A



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