STILLWATER – Oklahoma State University Extension Livestock Market Economist Dr. Derrell Peel analyzed the findings of the USDA Cattle on Feed Report released Friday.
According to the May Cattle on Feed Report, April placements were up 97.4% of last year, and April marketings were up 97.5% of last year. The total on feed number as of May 1 was 1.5% down from a year ago, similar to last month.
“If you look at the average pre-report estimate for placements, this number is just a smidge higher but well within the range,” Peel said. “The marketings also were just a smidge higher, but also within the range. When you factor in slightly bigger placements, but also slightly bigger marketings, the on-feed total comes in just about exactly on the pre-report estimates. So there were no big surprises in this report.”
Peel, who holds a Ph.D. in Agricultural Economics from the University of Illinois at Urbana Champaign, and has been an OSU Extension Livestock Marketing Specialist since 1989, noted the consistency of year-over-year declines for the past three or four months, however gradual they may be. He expects the trend to continue in the coming months. He also detailed how fed beef production is still up slightly from last year, but has slowly declined over the last six weeks, right along with non-fed beef production.
“Feedlots have done a great job over the last 18 months of slowing down the turnover rate and keeping those inventories high,” he added. “But once you get it slowed down, then you don’t get any more benefit from that. I think we are going to start to see that at the feedlot level with smaller inventories, and that’s going to translate into more consistent reductions in cattle slaughter, particularly fed cattle slaughter.”
Peel mentioned the major futures reversal that happened a week or so ago, which made some think the markets had reached their peak; however, he believes that won’t happen until supplies are at their lowest.
“We’ve continued to see these things move higher,” he pointed out. “We may see a little bit of flattening or even a slight pullback here as we get into summer, but so far this year, the underlying tightness of supplies has been the driver, and seasonality has taken a back seat to that. I don’t look for much change in this. I think we will continue to see very strong prices for feeder cattle at all levels as well as fed cattle.”
Key takeaways from the Cattle on Feed Reports of the first quarter show the fundamentals of the past several months are beginning to form reduced inventories.
“We know that the feeder cattle supplies out in the country are very tight, and it’s been hard to get these consistent reductions in placements that pull feedlot inventories down,” he said. “We are doing it now, but still at a fairly slow pace.”
High cattle prices are an incentive for producers to take their cattle to market, Peel said. Thus far, feedlot numbers are greater than expected; however that also means a decline in the nation’s cattle herd.