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 lb had the largest (10%) reduction. Placements weighing 600-699 lb and 700-799 lb were up 7.8% and 5.3%, respectively, while 800+ lb 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+ lb feeder steers and heifers is dwindling and cattle feeders are shifting towards 600-800 lb 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.