Senior Farm and Ranch Broadcaster Ron Hays talked to OSU Extension Livestock Market Economist Dr. Derrell Peel after the latest USDA Cattle of Feed Report was released on Friday afternoon, and Dr. Peel believes that the numbers reflect the tightening supply of beef cattle.
It held some minor surprises with placements lowered to 82% of last year for February. Marketings met expectations at 91% of last year, and the March 1 Total Cattle-On-Feed number was a tic higher than 2% less than last year.
“For several months, I’ve been expecting to see these numbers start coming down, so I think that part of it is just a function of the fact that we simply don’t have as many cattle,” Dr. Peel shared. “When you add that February would have been the tail end of the border closure from Mexico. More of that would have shown in January, but there may have been a little bit of that still showing up in the February numbers as well.”
He predicted that the struggle for cattle numbers at the feedlot level will become more apparent in the future. He will be watching the Cattle On Feed numbers closely for the next month or two to see if these reductions will be a continuing trend.
“I think we are going to see these feedlot inventories continue to come down,” Dr. Peel predicted. “Marketings will come down. That will ultimately lead to a decrease in beef production.”
He acknowledged the normality of a seasonal reduction in feedlot numbers at this time of year but noted that this one was sharper than normal.
About the broader market conditions, Dr. Peel commented, “We’ve got extremely strong fed-cattle prices, and I think this says that moving forward, we know the tightening supply of cattle are ahead of us, yet. They haven’t shown up so much on the feedlot level – I think the feeder cattle numbers out in the country are very tight, and that’s going to be particularly true if we are starting to hold back some heifers.”
He summarized the implications by saying, “All of that means that springtime is typically the peak for, not only light-weight cattle prices, but also fed cattle prices seasonally, but we may not see too much of a seasonal decline as we move towards the summer here simply because tighter supplies and a supportive trend may keep us from falling very much.”
For feedlots, these higher prices mean much tighter margins. “They are getting some help with the cost of gain being quite a bit better over the last few months as we’ve seen larger corn supplies, but the cheaper cost of gain doesn’t offset the fact that the feeder cattle price coming into the feedlot is very high and the numbers are tight, so feedlots are going to struggle with both maintaining capacity and the cost of those cattle coming in.”
He pointed out that the trend of feeding cattle longer to grow them larger was a short-term remedy, but it has reached its limit of making up for fewer numbers as inventories decrease further.
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