USDA issued three NASS livestock reports on December 23 to round out 2016. The December Cattle on Feed report showed that December 1 feedlot inventories were 98.6 percent of last year, down about the same amount as last month on a year over year basis. November placements were up 15 percent compared to one year ago, slightly above average pre-report estimates but not a big surprise for markets. November marketings were up 16.6 percent year over year, close to expectations. November 2016 had one additional business compared to last year which accounts for about five percent of the additional placements and marketings.
This report confirms that feedlots have continued to move cattle very aggressively in 2017, especially since September. In the last three months, feedlot marketings have exceeded placements by 13.1 percent resulting in net feedlot outflow of 685,000 head, thus leading to the smaller year over year feedlot inventories at the end of 2016. This has contributed to the larger than expected cattle slaughter (and beef production) in the last half of 2016. It suggests that feedlots have pulled cattle ahead, setting up relatively tighter first quarter 2017 feedlot supplies, particularly if winter weather should impact feedlot production in any significant way. That does not change the fact that feeder supplies will be larger in 2017 and more cattle must move through feedlots in the months ahead. The cattle and beef market supply challenges will continue highlighting the need for strong domestic and international beef demand to moderate larger beef production in 2017.
The monthly Cold Storage report showed that November cold storage holdings of beef were 4.1 percent above year earlier levels but down fractionally from the October record levels. Cold storage holdings typically increase during the winter so the build-up this fall is mostly seasonal. The relatively large cold storage inventories now reflects the relatively weak ground beef market and changes in beef imports and exports. Flows of beef through cold storage are a small part of total beef supplies and have averaged roughly 3 percent of production on a monthly basis in recent years. Thus, while large cold storage inventories are indicative of some beef market challenges, the inventory level is not a significant beef supply issue.
Finally, the quarterly Hogs and Pigs report indicated that the hog supply and pork production challenges are not over going into 2017. The December 1 inventory of all hogs was 103.7 percent of one year ago; breeding hogs were 101.5 percent of last year and market hogs were 104.0 percent of one year ago. All categories were above pre-report estimates and are likely to provoke a bearish market reaction. Estimates of the September through November pig crop as well as the farrowing intentions through May of 2017 were all above expectations. This may push 2017 pork production estimates even higher and will add to the supply pressures in all meat markets in the coming months.