May Cattle on Feed Report Recap

The United States Department of Agriculture’s National Agricultural Statistics Service (USDA, NASS) released their monthly Cattle on Feed report Friday afternoon (May 16). The report revealed that 10.648 million head of cattle were in U.S. feedlots with a capacity of 1,000 head or larger on May 1, 2014. Placements into feedlots during the month of April totaled 1.636 million head while marketings totaled 1.778 million head.

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Placements totaled 1.636 million head, a decrease of 4.9% from April 2013 and a 1.0% decrease from the five-year average from 2009 to 2013. The average of analysts’ expectations called for a decrease of 3.2% from the April 2013 number and the range of expectations ran from a decrease of 10% to an increase of 0.5%. So, there have been two straight months with a drop in placements of cattle. Keep in mind expectations called for smaller placements in January and February but those were wrong as sellers (cow-calf folks and backgrounders) had the urge to send cattle into feedlots. While that urge may still exist, the cattle most likely do not. So, expect fewer placements in the coming months as well (unless cattle slip in from the north and south).

Placements were lower in every state excluding South Dakota and Washington. Extremely drought plagued California had 8.1% fewer placements and, in talking with feeders, more California cattle are landing in locations outside of the state. Despite the overall decline, lightweight placements (under 600 pounds) were 4.1% higher than last year. This is likely the result of higher prices providing an incentive to sell. Those cattle were too light to send to feed in earlier months and were sent as soon as possible.

Cattle marketed in April totaled 1.778 million head, down 2.0% versus last year and down 3.0% compared to the average from 2009 to 2013. Pre-report expectations called for marketings to come in at a 2.1% drop, so the reported value was very much in-line with the average of expectations.

As a result, total inventories on May 1 were 10.648 million head, down 1.0% from one year ago and down 1.9% from the five-year average. Pre-report expectations called for a decline of 0.8% and fairly tight range from -1.5% to 0.0%.

Fewer cattle were placed than expected (though still within the wide range of expectations). Marketings and May 1 inventories were nearly in-line with pre-report expectations. As a result the market will most likely view the report as neutral. Some pressure could be felt by more deferred live cattle contracts given the higher year-over-year increase in lightweight placements. Feeder futures should respond positively since it continues to support the overall lack of available feeder supplies.

A break down on the numbers can be found at this link: http://goo.gl/1M4YXv