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OSU's Derrell Peel Believes Cattle Numbers Will Be Supportive to Market Prices in 2021

Mon, 21 Dec 2020 10:08:49 CST

OSU's Derrell Peel Believes Cattle Numbers Will Be Supportive to Market Prices in 2021 Mondays, Dr. Derrell Peel, Oklahoma State University Extension Livestock Marketing Specialist, offers his economic analysis of the beef cattle industry. This analysis is a part of the weekly series known as the "Cow Calf Corner" published electronically by Dr. Peel and Dr. Glenn Selk. Today, Dr. Peel talks about the latest Cattle on Feed report issued last week by USDA.

The December Cattle on Feed report showed that we are back where we started one year ago with December 1 feedlot inventories just equal to last year. November placements were down 8.9 percent from one year ago. November marketings were 98 percent of last year. The report was well anticipated with no surprises, though the low placements in this report will likely be viewed as mildly bullish.

Feedlot dynamics have made it a challenge to determine exactly what is going on in fed cattle markets. Monthly feedlot placements have varied from 23 percent down year over year in March to 11 percent higher year over year in July, to 11 percent below one year ago in October. For the January to November period, total placements are down 4.4 percent year over year. In the last six months, which would include the majority of current feedlot inventories, placements are 0.5 percent above the same period last year.

Feedlot marketings have been likewise very volatile this year with monthly marketings varying from 13 percent above last year in March to 27 percent below last year in May and back to 6 percent higher year over year in September. For the year to date through November, total marketings are down 3.1 percent year over year. In the last six months, feedlot marketings are just fractionally higher than the same period last year.

Flows of cattle through feedlots should begin to show more consistent tightening in 2021. The beef cowherd was at a peak in January 2019 and led to a 2019 calf crop that was down 0.7 percent from the 2018 peak calf crop. The estimated feeder cattle supply on January 1, 2020 was down 0.4 percent from 2019 levels. The estimated 2020 calf crop in the July Cattle report is down another 0.7 percent from 2019. The July estimate of feeder cattle supplies was up slightly but was likely pushed higher due to the intra-year dynamics of feedlot placements. Current estimates suggest that the total calf crop in 2020 is 513,000 head smaller than the peak in 2018.

Herd dynamics can also impact short term cattle slaughter and beef production. Herd liquidation will maintain higher slaughter rates for a time, even as cattle numbers are declining. Total female slaughter (heifers plus cows) is an aggregate indication of herd dynamics. For example, in 2016, active herd expansion resulted in female slaughter of 43.6 percent, the lowest level since 1973. By 2019, female slaughter was at 49.1 percent of total slaughter reflected as a 1.0 percent liquidation of cows as of January 1, 2020. So far in 2020, weekly average female slaughter percentage has equaled last year suggesting modest additional herd liquidation. Year to date heifer slaughter is down 3.7 percent year over year and total cow slaughter is down 1.3 percent, with dairy cow slaughter down 5.3 percent and beef cow slaughter up 2.7 percent so far this year.

Total cattle slaughter is down 2.8 percent thus far in 2020 and is expected to decline again in 2021. With herd inventories continuing to drift lower, total cattle numbers should be generally supportive of cattle prices in 2021.



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