Feeder cattle supplies outside feedlots on October 1, 2015, were 3.4 percent higher than October 1, 2014, inventories and were higher year-over-year for all of 2015. These feeder cattle supplies persist despite the pace of placements being below year-earlier levels in 7 of the first 9 months of the year.

While the October release of NASS’ Cattle-on-Feed report contained no real surprises, it did provide some insight into two ongoing phenomena: recent marketings of cattle from feedlots of 1,000 head or more and heifer retention for cow herd expansion. The Cattle-on-Feed report showed ongoing year-over-year higher placements of feeder cattle weighing over 800 lbs., a scenario that has been playing out every month in 2015 except for May, when there was no change from May 2014. These heavy feeder cattle have accounted for an average of 40.5 percent of net placements of cattle in feedlots of 1,000-plus head for each month thus far in 2015, well above a norm in the 25-percent range.

Typically, heavy cattle are on feed for a relatively shorter period of time. For most of 2015, these cattle have been retained on feed for atypically long periods and have contributed significantly to year-over-year larger cattle-on-feed inventories and the record heavy weights of cattle marketed in 2015. A calculated ratio of over-800-lb. placements of cattle (lagged either 5 or 6 months) to marketings averaged 38.8 to 38.9 percent, compared with a more typical 30 percent, which implies that these heavy-weight feeder cattle have likely constituted a larger than normal proportion of cattle marketed over the last several months. Feeding periods could shorten and help keep feedlot inventories of market-ready cattle more current than they have been for most of 2015; however, these heavy, over-800-lb. cattle are likely to provide large numbers of market-ready cattle—disproportionately steers—through at least the first quarter of 2016 (or longer, if over-800-lb feeder cattle continue to be placed in year-over-year larger numbers).

Total third-quarter cattle placements in 1,000-plus feedlots were down 3 percent compared with last year. Given that pasture conditions have improved and live cattle prices are lower than in 2014, producers may be waiting for market conditions to improve before selling cattle.

The Oklahoma National Stockyards prices on November 9, 2015, for medium number 1 feeder steers weighing 750-800 pounds ranged between $169- $177/hundredweight (cwt)–down around $40 compared with this time last year. USDA projects fourth-quarter 5-area direct total all grades steer prices to be $130-$134/cwt, down over $30 compared with 2014.

While September 2015 placements in the 800-plus-pound category were up nearly 8 percent over last year, the backlog of very heavy market-ready cattle in the feedlots may clear out in fourth quarter. In addition, packers have increased the discounts on very heavy cattle. Generally speaking, fourth quarter tends to see a seasonal upswing in placements—they are expected to pick up in the last quarter and may spill over into the early part of 2016.

Marketings will be impacted if placements are delayed. Like third-quarter placements, marketings were down in the third-quarter 2015 compared with thirdquarter last year. Cattle are spending longer periods on feed primarily because feed costs are relatively low, and the current market does not provide much incentive to sell fed cattle. Early November 2015 live cattle prices picked up compared with early October’s sharply lower prices. For the week ending November 8, 2015, 5- area all grade fed steers were $130.40/hundredweight (cwt), roughly $30 lower than year-earlier fed-steer prices.

Cattle marketed in November 2014 were the last to exhibit positive cattle-feeding margins. October 2015 margins were negative by over $500 per head and could easily continue in the red until at least January 2016 (High Plains Cattle Feeding Simulator: http://www.ers.usda.gov/data-products/livestock-meat-domesticdata.aspx). These negative margins will likely exert even more downward pressure on feeder cattle prices, as well as on cow price, and could temper enthusiasm for what has appeared to be a rapid buildup in U.S. cow inventories.