Fed cattle inventories remain low, but growing

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The United States Department of Agriculture’s National Agricultural Statistics Service (USDA, NASS) released their monthly Cattle on Feed report Friday afternoon (Mar 21). The report revealed that 10.790 million head of cattle were in U.S. feedlots with a capacity of 1,000 head or larger on March 1, 2014. Placements into feedlots during the month of February totaled 1.650 million head while marketings totaled 1.549 million head.

Placements were expected to be larger once again in February. The average of analysts’ expectations called for an increase of 9.1 percent from last year’s number and the range of expectations ran from an increase of 2.2 percent to 18.2 percent. So, while the range was wide, everyone who was polled looked for a year-over-year increase. The reported placement number, 1.650 million head, was an increase of 14.7 percent from February 2013 and a 1.0 percent increase from the five-year average from 2009 to 2013. Based on this, it is apparent that last year’s number was a bit out of line. Indeed, the February 2013 placement number was the lowest since the current on feed data started in 1996.

Placements by weight revealed a tendency toward heavier cattle being put on feed, but overall placements were up across all weight classes. Despite lower feed prices in recent months, keeping cattle on grass remains an advantage. Placements in 600 to 699 pound weight group showed the largest year-over-year percentage increase, but were the smallest in terms of total head placed. This weight group saw a total of 330 million head put on feed versus 515 head for the 800 and up group, which was the largest. The average placement weight was 713.9 pounds, employing the common method of using the midpoint from each weight group, which was on par with last year and the average from 2009 to 2013. Nebraska once again led the nation in total placements with 430 million head. Texas accounted for 410 million head and Kanas placed 330 million head.

Cattle marketed in February totaled 1.549 million head, down 3.4 percent versus last year and down 9.4% compared to the average from 2009 to 2013. Pre-report expectations called for marketings to come in at a 2.9 percent drop, so the reported value was a tad worse than that. This marks the lowest level of February cattle marketed since the data began in 1996 and the second lowest across all months. Before being too alarmed, keep in mind that supplies are extremely tight and will limit marketings. Also, February is typically one of the three lowest months for marketings during the year due to the timing of placements five to six months earlier (August and September 2013 placements were, respectively, the lowest and second lowest on record for their respective months) and the lack of prominent demand, for example, given the start of the Lent season. 

As a result of the higher placements than were expected and the lower marketings, total cattle on feed inventories were higher than anticipated. The 10.790 million head were 0.5 percent lower than March 1, 2013 and 3.6 percent lower than the average from 2009 to 2013. Interestingly, inventories have risen month-over-month for the past two months, which is typically not the case. So, we are noticing a build-up of inventories at a time when they historically shrink. While this comes across as concerning the more likely result will be fewer placements in future months and then fewer cattle on feed in the latter part of 2014. Therefore, the general tightening of supplies has not suddenly evaporated and continues to provide underlying price support.

The Markets

Live cattle futures came out of the gate on the low side Monday given the bearish tone to the Cattle on Feed report, but losses were tempered. As the week has progressed prices continue to climb. Tuesday’s Conference Board Consumer Confidence Index climbed to 82.3, the highest since January 2008, supporting overall assurance in future beef demand. The five-area fed live and dressed prices marked new records, again, at $150.87 and $241.44 per hundredweight, respectively up $0.92 and $1.22. Choice boxes also set a new record for the week ended Friday at $242.41 per hundredweight. Feeder prices were higher while, for the most part, stocker prices were lower week-over-week. Omaha corn and dried distiller’s grains prices were also lower. 

 

 

Week of

Week of

Week of

Data Source: USDA-AMS Market News

 

3/21/14

3/14/14

3/22/13

5-Area Fed Steer Price

all grades, live weight, $/cwt

$150.87

$149.95

$124.78

all grades, dressed weight, $/cwt

$241.44

$240.22

$197.77

Boxed Beef

Choice Price, 600-900 lb., $/cwt

$242.41

$240.72

$193.57

Choice-Select Spread, $/cwt

$6.80

$3.96

$0.39

700-800 lb. Feeder Steer Price

Montana 3-market average, $/cwt

$186.6


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