Like a huge backup from a wreck on the interstate that takes hours to clear up and more hours to return to a normal traffic flow, the US cattle and meat industries are backing up, and it may take years to clear.
And even though President Trump ordered meat packing plants to reopen, designating them critical to the nation’s food supply, the damage to the normal flow of feeder cattle to feedlots, fed cattle to packing plants and meat to retail outlets may already be done, a market analyst said. It’s not like packers can just turn up production and relieve the backlog of fed cattle at the feedlots in a week or two.
Using data from the monthly USDA Cattle on Feed report, the Livestock Marketing Information Center calculated the number of cattle that have been on feed for longer than 120 days on April 1 at 4.481 million head, up from 4.463 million a month earlier. This was down from 4.628 million a year earlier but up from the 2014-2018 average of 4.135 million.
While last year’s number of cattle on feed for that long was higher, they were there on purpose as the market was paying more for choice and prime carcasses. Currently, though, fed cattle are losing money for the feedlots, and their presence is a burden to the bottom line.
BACKING UP TO THE RANCH
What gets lost in that narrative is the fact that the backup of cattle extends clear to the cow/calf producer, who have responded by withholding feeder cattle from the market where current prices represent losses, awaiting better times and higher prices. But this just adds to the backlog problem.
Nevil Speer, director of industry relations for Where Food Comes From, said in an interview that feeder cattle receipts at auction markets over the past seven weeks have been down sharply.
“Those feeder cattle haven’t disappeared,” Speer said, they’re just being held at home.” Eventually, that’ll likely be reckoned with a surge in feeder cattle placements in months to come.”
The year started with 26.45 million head of feeder cattle outside of feedlots, in line with the 2016-2019 average of 26.32 million, Speer said.
However, reduced placements as unsold fed cattle stack up at the feedlots have dramatically changed the year-over-year comparison, he said. The May 1 inventory is more than 1 million head larger than available supplies from 2016 through 2019, which averaged 18.85 million.
CHALLENGING TIMES AHEAD
Once some sense of normalcy returns, it’ll be challenging for the industry to absorb those extra cattle seamlessly, Speer said. And, the spring calf crop will begin pressuring available supply into the fall marketing season.
Value-added management and subsequent marketing is more important than ever.
CATTLE, BEEF RECAP
A few cattle traded this week at $94 to $100 per cwt on a live basis, down $1 to $5 from last week’s $95 to $105. Dressed-basis trade took place at $150 per cwt, versus last week’s $148 to $160.
The USDA choice cutout Wednesday was up $26.56 per cwt at $357.38, while select was up $19.03 at $339.91. The choice/select spread widened to $17.47 from $9.94 with 77 loads of fabricated product sold into the spot market.
There were no delivery intentions tendered against the Apr futures contract on Wednesday.
The CME Feeder Cattle index for the seven days ended Tuesday was $118.83 per cwt, up $0.14. This compares with Wednesday’s Apr contract settlement of $119.55, down $0.07 and the May contract settlement of $118.55, up $0.05.