Small Feedlots Hold A Lot Of Cattle

The February USDA Cattle on Feed report said that, of the total number of cattle and calves on feed, about 18% were in feedlots with less than 1,000 head capacity and accounted for about 13% of all cattle marketed, said Elliott Dennis, Extension livestock economist at the University of Nebraska-Lincoln, in a Livestock Marketing Information Center letter to Extension agents called In The Cattle Markets.  The 2013-2022 average is 18.3% of cattle on feed and 12.9% of marketings.

For perspective, using USDA-National Agricultural Statistics Service data, feedlots with less than 1,000 head capacity represent 92.2% of all feedlots operating in the US – down from 98.1% in 1996.

 

PLACEMENT WEIGHTS FLUCTUATING

 

While the number of cattle on feed has been increasing to record levels, the weight at which cattle have been placed has changed relative to the 2016-2020 average, Dennis said.  Cattle weighing less than 700 pounds accounted for 6.5% more of the cattle in Texas, 1.9% more in Nebraska and 1.2% more in Kansas.

More than 75% of the change came from feedlots moving away from 700- 799-pound feeder cattle, he said.  The rest came from feedlots moving away from feeders weighing 800 pounds or more.  Colorado was different having 1.18% more of the cattle in the 700- 799-pound range.

Deferred contracts from Oct through Apr’23 provided signals to increase placements targeted at those delivery months, he said.  Futures were pricing in potential drought, strong domestic beef demand, record export levels, feeder cattle prices, corn and other input prices.

 

CORN FUTURES KEEP RISING

 

Rising corn prices are not necessarily an issue as long the live cattle futures likewise rise, but it does affect the weight of the feeder cattle placements, he said.

Generally, when corn prices are high, feeders lean toward heavier placements because the feedlot cost-of-gain is higher, he said.  When corn prices are low, lighter-weight feeders are favored because the cost of gain is low.

So why could feedlots continue to place lighter feeder cattle?, Dennis asked.  Feedlots want to place lighter cattle with higher feed prices because of better performance and ultimately total feed consumed.

Studies have shown that, all things being equal, the only way to reduce total feed costs would be to reduce harvest weights, he said.

The decision to place lighter cattle has important implications for overall beef production, production timing and feedlot profitability, Dennis said.  Lighter-weight placements have lower average daily gain, lower feed conversions, longer days on feed and lighter harvest weights.

The upshot is that total quantity of beef production likely will decrease pushing boxed beef and retail prices, Dennis said. And, smaller carcass weights are associated with more cattle grading select.

 

CATTLE, BEEF RECAP

 

The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $140.92 to $145.00 per cwt, compared with last week’s range of $140.55 to $143.00.  FOB dressed steers and heifers went for $221.90 to $225.95 per cwt, versus $218.70 to $224.02.

The USDA choice cutout Thursday was down $1.37 per cwt at $254.35, while select was off $3.55 at $247.79.  The choice/select spread widened to $6.56 from $4.38 with 108 loads of fabricated product and 44 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 $1.15 to $1.25 a bushel over the May futures and for southwest Kansas were steady at $0.15 over May, which settled at $7.47 3/4, up $0.22 3/4.

The CME Feeder Cattle Index for the seven days ended Wednesday was $157.78 per cwt down $1.47.  This compares with Thursday’s Mar contract settlement of $156.35 per cwt, down $1.95.