Feedlots Likely Working Down Front-Loaded Inventories

It appears that US feedlots are working down their unusually large inventory of heavy fed cattle.

The latest USDA Cattle-On-Feed report showed cattle placed on feed still are biased toward the heavy side so average slaughter weights in coming months likely will be heavier than normal, according to USDA data.

But cattle slaughter is up while average weights are coming down, an indication of rising efforts to work down feedlot inventories of long-fed, extra-heavy cattle.

The combination of the number of head and weight per head pushed estimated beef production for the last five weeks to about 2.3 billion pounds, up 6.2% from last year.  The 485 million pounds for the week ending April 30 was the largest weekly beef production since the week ending Oct. 17, 2015, as USDA Agricultural Marketing Service and National Agricultural Statistics Service data shows.




David Anderson, professor and extension economist at Texas A&M University’s AgriLife Extension Service, wrote in this week’s In The Cattle Markets, “Spring sprung early this year as fed cattle prices have dropped sharply from their highs in early Spring.”

Texas and Oklahoma fed cattle prices averaged $124 per cwt on a live basis at the end of April, down 10.8% from $139.05 for the week of March 20.  The week of April 20, prices averaged $126.87, down 9.1% from the March quote.

Anderson credited rising beef production for the decline.

Beef production is made up of two parts, he said, the number of cattle slaughtered and their weights.  Steer and heifer slaughter in April was up an estimated 1.8% over the year before.

USDA final daily slaughter data through April 16 indicated that while steer slaughter was above a year ago, heifer slaughter was lower than in April 2015.  This is an indication that herd growth is continuing and that more feeder and fed cattle can be expected down the road.

Dressed weights continued to decline seasonally, Anderson said.  Steer weights, at 878 pounds, were the lowest of the year so far and the lowest since July 2015.  However, they remained above a year ago by 6 pounds.

Heifer weights rose by 2 pounds to 820 pounds, but except for the previous week, they were the lightest since September 2015.




Increasing beef production is the result and is pressuring cattle prices, which in turn is pressuring feeder and calf prices, he said.  But the lower weights and fewer cattle to market in coming weeks, months or years likely will provide the support – just not now.

In the meantime, the long-term trend is for more beef production and lower prices as cattle numbers expand.




Cash cattle markets Tuesday were quiet with no discernible bids or offers.  Many expect fewer cattle to be offered to packer buyers this week despite one major survey that showed overall feedlot showlists were about steady overall.

Markets last week traded at $124 per cwt on a live basis and $195 to $197 on a dressed basis.  Both were down $3 to $5 from the previous week.

The USDA’s choice cutout Tuesday was sharply lower at $205.94 per cwt, off $3.83, while select was off $2.94 at $197.02.  The choice/select spread narrowed to $8.92 from $9.81 with 178 loads of fabricated product sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Monday was $143.54 per cwt, up $0.11.  This compares with the May settlement Tuesday of $143.40, up $1.97.