It will take several months for feedlots to work through their June 1 record inventory, and the longer it takes, the more sudden and dramatic the inevitable decline will be, said Oklahoma State University Livestock Marketing Specialist Derrell Peel, said in a newsletter to Extension agents called Cow-Calf Corner.
Feedlot numbers are declining seasonally with the June 1 level down for the fourth straight month from the February record of 12.199 million head, Peel said. Yet Friday’s USDA Cattle on Feed report showed feedlot inventories of 11.846 million head, 101.2% of a year ago.
Among leading cattle feeding states, number one Texas was up 3% with number two Nebraska up 4%; number three Kansas was down 1% while number four Colorado was up 1%. Peel said, these four states represented 76.4% of feedlot inventories.
NUMBERS MIXED
May feedlot marketings were 1.914 million head, 102.4% of last year, although May included one additional business day, resulting in daily average marketings being lower than a year ago, he said.
May placements were 1.869 million head, 97.9% of last year, lower than expected and less than the lowest pre-report estimate, Peel said. May placements also included more lightweight cattle with those weighing less than 700 pounds up 4.9%, while placements weighing more than 700 pounds were down 5.5%.
RECORD INVENTORIES DESPITE SMALLER HERD
The largest calf crop of this cattle cycle was in 2018, decreasing from a peak of 36.3 million in 2018 to 35.1 million in 2021. It could be expected that feeder supplies would have peaked in 2019 and feedlot production in 2020, Peel said, but pandemic delays, among others, pushed some feedlot production into 2021.
The decline in heifer retention associated with cyclical liquidation means more heifer calves are directed into feedlots, he said. The inventory of beef replacement heifers peaked in 2017 at 6.36 million and dropped to 5.61 million in 2022 as herd liquidation was exacerbated by widespread drought in 2021 and 2022.
Heifer slaughter increased from a low of 7.35 million in 2015 (at the beginning of herd expansion) to 9.82 million in 2019, dropped back to 9.45 million in 2020 (partly because of the pandemic) and increased again to 9.83 million in 2021, Peel said. So far in 2022, heifer slaughter is running 3.3% more than 2021.
Finally, feedlots have placed more lightweight cattle, increasing days on feed and allowing feedlot inventories to remain elevated, he said. In the last six months, overall placements have increased 1.7% year over year with placements under 700 pounds up 3.5% and those over 700 pounds up just 0.5%.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $140.89 to $145.69 per cwt, compared with last week’s range of $139.00 to $147.09. FOB dressed steers, and heifers went for $219.37 to $222.73 per cwt, versus $216.47 to $225.02.
The USDA choice cutout Tuesday was down $1.54 per cwt at $267.14, while select was down $1.93 at $243.31. The choice/select spread widened to $23.83 from $23.44 with 123 loads of fabricated product and 30 loads of trimmings and grinds sold into the spot market.
The USDA reported that basis bids for corn from feeders in the Southern Plains were unchanged at $1.90 to $2.00 a bushel over the Jul futures and for southwest Kansas were steady at even the Jul, which settled at $7.44 1/2 a bushel, up $0.15 1/4.
No live cattle delivery intentions were tendered Tuesday.
The CME Feeder Cattle Index for the seven days ended Monday was $164.20 per cwt up $1.11. This compares with Tuesday’s Aug contract settlement of $171.82, down $2.30.