The cattle industry in general and feedlots in particular have done a good job managing growing livestock supplies for most of the last year, helping to minimize supply pressure coming to bear on cattle markets in the coming months.
In recently available data released the week of April 17, the fed cattle market pushed to new seasonal highs at more than $130 per hundredweight.
“Fed prices have continued to pleasantly surprise with a stronger than expected first quarter that has extended through much of April,” said Derrell Peel, Oklahoma State University Cooperative Extension livestock marketing specialist. “Fed prices have been supported by strong boxed beef prices.”
After a brief drop in early April to $207 per hundredweight from the March weekly high of nearly $225 per hundredweight, Choice boxed beef prices recovered to $217 per hundredweight by the week of April 17.
Underlying strength in beef demand – both domestic and export – are supporting boxed beef and fed cattle prices even as beef production has increased 4.7 percent for the year to date.
The April USDA Cattle on Feed report showed an on-feed inventory fractionally higher than one year ago at 10.9 million head for feedlots of more than 1,000-head capacity. Placements were larger than expected at 111 percent of last year and represented the largest March placements in the current data series back to 1996.
Peel cautions placements often receive the most attention in the monthly reports and may cause some bearish reaction.
“While placements and the placement weight breakdown provide more specific indications of the timing of fed cattle marketings and slaughter in coming months, the general idea that placements will grow should not be a surprise,” he said.
Three years of confirmed herd expansion since 2014 and likely continued expansion in 2017 means the cattle pipeline is growing, with plentiful feeder cattle supplies headed toward feedlots for months to come.
“Record March placements are consistent with the industry’s first sustained herd expansion since the early 1990s, predating the current data period,” Peel said.
March marketings were 110 percent of last year. Peel added mnthly feedlot marketings often receive little attention, being viewed mostly as history by the time the report is released. Still, strong marketings since mid-2016 have contributed greatly to the strength of fed cattle markets thus far in 2017.
The 12-month average monthly feedlot marketing rate, marketings as a percent of on-feed inventory, has been increasing since July 2016 and is currently at the highest level since late 2014.
"This strong marketing rate has helped keep days on feed down, with the Kansas Focus on Feedlot data indicating that days-on-feed is currently at the lowest 12-month average level since late 2014 as well,” Peel said.
Smaller carcass weights also are helping to hold beef production to smaller year-over-year increases, thus supporting boxed beef and fed cattle markets. Steer carcass weights were down 28 pounds year-over-year with heifer carcass weights similarly down 26 pounds. For the year to date, steers carcass weights have averaged 13 pounds less than last year while heifers decreased an average of 11 pounds.
“Aggressive marketings and reduced days on feed have played a part in smaller carcass weights,” Peel said. “Another component is that fewer heavy feeders have been placed in recent months.”
The percent of monthly placements for animals more than 800 pounds – listed as a 12-month average – has declined for several months. Lighter placement weight results in lighter slaughter and carcass weights.
So what does the foreseeable future hold? Most likely, continued strong domestic and export beef demand.