For several months, analysts have anticipated that tight feeder supplies would catch up with feedlots, and feedlot placements would have to decrease due to a lack of cattle. “I still think that will happen but, I confess, I continue to be amazed at the cattle industry’s ability to wring out feeder supplies to an extent unlike anything we’ve seen before,” says Derrell Peel, Oklahoma State University Extension livestock marketing specialist.
The May Cattle on Feed report shows feedlot inventories up 7% over this time last year. However, it should be noted that the May 1 inventory is only 101.4% of the previous five-year average and highlights the fact that we are still comparing to a small year-ago value.
April placements were up 10% year over year and up nearly 13% over the previous five-year average for April. It’s a big placement number by any measure. This highlights the obvious question of where feedlots continue to find these numbers of feeder cattle to place. It’s necessary to look at the placement weight breakdown and regional patterns, along with other data, to understand just how unique the current situation truly is.
The placement weight breakdowns show a bimodal placement pattern that reflects what cattle feeders would like to do vs. what they are able to do. With high cost of gain and expectations for continued high feed costs, feedlots have an incentive to place heavy feeders.
Indeed, of the increase in April placements, 31% were feeder cattle over 800 lbs. Placements weighing between 600 to 800 lbs. accounted for only 16% of total April placements. The biggest part of the placements was feeder cattle weighing less than 600 lbs., which accounted for 52% of total placements. These cattle won’t be marketed until roughly November. Despite high feed costs, feedlots are placing very lightweight calves – calves that would typically be part of feeder supplies later in the year.
A state-to-state comparison of the placements is also instructive. Most of the increase in placements occurred in the Southern Plains. Placements were up in Kansas, Oklahoma and Texas.
In Texas, where placements were up by a total of 110,000 head, 73% consisted of cattle weighing less than 600 lbs. Many of these lightweight cattle consisted of Mexican cattle directly entering feedlots rather than grazing as stockers.
The lightweight placements likely also included some drought-forced early weaning, especially fall-born calves. Some of the 28% of Texas placements weighing more than 600 lbs. were likely heifers diverted from planned replacements due to the drought conditions.
The weight breakdown in Kansas shows that most of the increase consisted of feeders over 700 lbs. This likely included mostly yearling stockers but may have also included some heifers originally planned for herd replacements.
Feedlot placements were also up in California, Arizona and Idaho. Although there’s no weight breakdown of placements in those states, it’s highly likely that most of the increase was in lightweight dairy calves.
Calf slaughter for the nation was down 13% in April and is down 11% for the year to date. Though calf slaughter is minor compared with total cattle slaughter, this is one more small increment to boosting placements in the short run. In contrast, April placements were down in Colorado, Iowa, Nebraska and South Dakota. The decrease is consistent with the cool, wet conditions and limited feeder supplies in the region. In Nebraska, placements of feeders over 800 lbs. were up slightly but were more than offset by decreased placements in all other weight categories.
One final unique contributor to larger feedlot inventories is decreases in the “other disappearance” category of the Cattle on Feed report. Other disappearance occurs for several reasons but, at this time of the year, often includes some lightweight cattle that initially arrive at feedlots then return to pasture when forage conditions improve.
This is happening much less this year. In fact, other disappearance has been down year over year for each of the last six months. Like calf slaughter, other disappearance is a minor factor but these two, combined with direct placement of Mexican feeder cattle, is indicative of the very unique situation and the intensity with which feeder markets are beating the bushes to find feeder-cattle supplies.
The vacuum of feeder-cattle supplies would already be very apparent without increased Mexican cattle imports, which are unlikely to continue at current rates; reduced veal production, which is already projected to show a nearly 10% annual decrease; drought-forced calf and replacement heifer sales, which are likely mostly done at this point; and reduced other disappearance, which is already at minimal levels.
The increasingly steep downhill slope of feeder supplies is nearing a precipice over which we are likely to fall in the next month or two – unless the market can pull another rabbit, or more feeder cattle, out of the hat once again.