Feedlot Inventories Persist: Peel

Feedlot inventories have persisted well past the cyclical peak in cattle inventories, said Oklahoma State University Livestock Marketing Specialist, Derrell Peel, in a letter to Extension Agents called Cow-Calf Corner.

The total cow herd peaked on Jan. 1, 2019, with the 2018 calf crop the largest of the current cattle cycle, Peel said.  Estimated feeder supplies declined from the 2019 peak to 2020 but decreased only slightly going into 2021.

 

HERD LIQUIDATION CONTINUES

 

Herd liquidation since 2019 has reduced heifer retention and added to feeder supplies despite declining calf crops following the cyclical peak, Peel said.  Total feedlot placements through November were up 2.7% in 2021.

Some of that was related to pandemic disruptions and delayed placements in 2020, he said.  Feedlot placements over 700 pounds were up 4.0% for the January-November period, including a 2.7% increase in placements over 900 pounds.

Increased placements of heavier feeders is partially in response to higher feed costs this year, Peel said.  Placements of under-700-pound calves were up a scant 0.7%.

However, the November placements contrasted with the year-to-date patterns, he said.  The 3.6% increase in November placements was made up entirely of calves weighing less than 700 pounds, up 7.0%, with placements of feeders weighing more than 700 pounds down 0.7% compared with last year.

 

AN ANOMOLE?

 

November placements weighing more than 800 pounds were down 1.7% from last year, he said.  Placements of lightweight cattle typically are high in November with seasonally large numbers of spring-born calves.

However, the increase may be somewhat exaggerated this year for several reasons, Peel said.  Drought limitations likely contributed to increased placements, the result of reduced pasturing opportunities this winter.

Additionally, drought may also be causing fewer heifers to be held as replacements and further increasing lightweight placements, he said.

Finally, feedlots may be placing more lightweight cattle simply because overall feeder supplies are declining, Peel said.  As feeder supplies decrease, feedlots will, for a few months, be able to hold feedlot inventories by placing smaller cattle, essentially borrowing against future feeder supplies.

Lightweight placements will add more days on feed and further extend feedlot inventories for a period of time, he said.  However, as 2022 proceeds, smaller feeder cattle supplies will result in more pronounced decreases in feedlot inventories.

Cattle industry supply dynamics always are slow to develop and have been further disrupted by the pandemic in 2020 and 2021.  Drought may add additional issues in 2022, but tighter cattle supplies should be more evident across the industry, Peel said.

 

CATTLE, BEEF RECAP

 

The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $136.23 to $137.27 per cwt, compared with last week’s range of $137.09 to $138.34.  FOB dressed steers and heifers went for $214.38 to $215.04 per cwt, versus $216.25 to $219.76.

The USDA choice cutout Thursday was down $0.45 per cwt at $265.26, while select was up $1.14 at $258.23.  The choice/select spread narrowed to $7.03 from $8.62 with 75 loads of fabricated product and 27 loads of trimmings and grinds sold into the spot market.

The USDA reported Thursday that basis bids for corn from livestock feeding operations in the Southern Plains were unchanged at $1.35 to $1.45 a bushel over the Mar futures and for southwest Kansas were unchanged at $0.40 over Mar, which settled at $5.96 a bushel, down $0.09 1/2.

No delivery intentions were posted against the Dec live cattle contract Thursday.

The CME Feeder Cattle Index for the seven days ended Wednesday was $163.55 per cwt up $4.10.  This compares with Thursday’s Jan contract settlement of $166.32 per cwt, up $0.45.