Feed Yards Front-End Loaded

US feed yards are front-end loaded, and it will take several weeks to clear the air, contrary to many who say it will be cleared up in just a few weeks.

The September USDA Cattle-on-Feed report showed the industry has begun to work this supply of well- to overly fed cattle down. Of the 9.986 million cattle on feed Sep. 1, about 2.961 million, or 29.7% had been on feed for 120 days or more, and 1.183 million, or 11.8%, have been on feed for 150 days or more.

Feedlots’ front-end loaded positions actually began to decline in July. As of Aug. 1, there were an estimated 4.819 million head on feed 90 days or longer, down 6.23% from 5.139 million on July 1. Still 48.2% of the cattle on feed at that time likely were nearing, or were past, optimal slaughter weight.

Long-fed cattle moved above seasonal norms in May. June’s decline followed the seasonal average tilt but at a higher number. July’s increase went against the grain, although the August decline resumed the normal downward tilt of the charts.

What’s more, August marketings as a percent of cattle on feed for 90 days or more continued July’s counter-seasonal decline, indicating that feed yards remain well covered in long-fed cattle.

In addition, cattle feeders have displayed a tendency to favor heavy feeder cattle for placement because they have the potential to reach market weight in a shorter period of time than lighter weight calves. There also has been a greater tendency to place more in the Western Corn Belt where there is easy access to distiller’s grains, which have lost some export demand because of the higher US dollar.

Averaging USDA placement data for this year and the previous six years shows average placement weights running 12 to 16 pounds above the 2009-2013 average all year, except for August, which dropped to a nine-pound premium.

But that creates a problem for cattle feeders. Placing heavy calves tends to yield larger fed cattle. Larger fed cattle have larger (heavier) carcasses, producing more meat per animal and reducing a packer’s need for more slaughter cattle. The result is lower prices or slower slaughter rates or both, often leading to even more of a backlog at the feed yard.

USDA data on steer slaughter weights shows the average weekly slaughter weight consistently above last year and the 2009-2013 average. The difference between weekly carcass weights and the five-year average rose to 54.6 pounds in the latest week. This is like adding 914 more cattle a week, or about 3,656 a month.

And it’s just that scenario that could lead to a slower reduction in front-end feedlot cattle than many realize.

The good news is that retail grocers should be making a tidy sum on beef. Even though movement isn’t as high as competing meats, the cash flow could be better. This could incentivize many to offer some nice beef specials in the weeks leading up to the Thanksgiving Day holiday.

CASH FED CATTLE TRADE CHOPPY

Cash cattle trade in the Plains and Western Midwest this week has been choppy with little consistency other than that prices are down and trending lower. Iowa has seen some action at $128 per cwt down to $126 on a live basis with dressed action at $203 to $205. Nebraska trades were reported at $129 to $130 live and $208 down to $202 dressed. A few trades also were reported in Kansas and Colorado at $130.

Last week, cattle traded at $135 to mostly $136 per cwt on a live basis and $214 to $215 on a dressed basis.

The USDA reported sharply lower boxed beef prices Wednesday with its choice cutout down $4.88 per cwt at $217.89 and select off $3.28 at $213.51 with 159 loads of fabricated product sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Tuesday was $196.84 per cwt, down $0.07. This compares with the Sep futures settlement Wednesday of $194.95, down $0.75.