Structural changes to the cattle feeding industry

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On February 22, 2013, USDA released its February Cattle on Feed report.  In addition to the on feed, marketings, and placements data discussed in last week’s Cattle & Corn Comments, the February Cattle on Feed report contains USDA’s annual estimate of the number of feedlots, inventory, and marketings by size category.  In general, the data show a continuation of the trend towards fewer, but larger, feedyards.  In fact, there were 2,000 (2.7%) fewer feedyards with less than 1,000 head capacities on January 1, 2013 compared to a year ago.  There were 30 fewer feedyards with 1,000-1,999 head capacities at the beginning of this year (740 total).  There was an increase of 10 feedyards over the last year with capacities ranging from 2,000 to 3,999 head.  The number of feedyards with 4,000 to 15,999 head capacities remained constant over the last year, at 515.  The number of feedyards with 16,000-23,999 head capacities and 24,000- 31,999 head capacities increased by 2 and 3, respectively, which are 2.3% and 5.8% increases.  The number of 32,000-49,000 head capacity feedyards declined by 5 while the number of 50,000+ head capacity feedyards stayed constant at 66.

In 2012, the feedyards with less than 1,000 head capacities marketed 2.854 million head.  That’s only 11% of total fed cattle marketings for the year, despite the large number of these small feedyards (73,000).  Further, it is a decline from 12% of total marketings in 2011, and from 15% only ten years ago.  The largest 50,000+ head capacity feedyards marketed 33% of all fed cattle in 2012, which is up from 25% ten years ago.  The second largest category of feedyards (32,000-49,999 head) marketed 15% of fed cattle last year.

USDA’s report indicated that the total capacity of the 1,000+ head feedyards was 16.9 million head on January 1, 2013, a decline of 100,000 head since January 1, 2012.  Despite that decrease, capacity utilization has worsened for feedyards due to larger declines in the number of cattle available for feeding.  As of January 1, 2013, about 66% of total capacity in the 1,000+ head feedyards was being utilized, compared to 70% a year ago.

These data indicate that the structural changes in the feedlot industry that were evident over the last several years continued, and even accelerated, in 2012.  Further, with high feed costs likely to continue much of 2013 (at least until the 2013 corn harvest), it appears like the number of feedyards will continue to decline – especially for the smaller sized operations, but loss of a few large feedyards this next year will likely occur too.

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.

Source: Derrell Mark

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