Senior Farm and Ranch Broadcaster Ron Hays talked to OSU Extension Livestock Market Economist Dr. Derrell Peel after the latest USDA Cattle-on-Feed Report was released on Friday afternoon, and Dr. Peel analyzed the latest numbers.
According to the May Cattle on Feed Report, April placements were up 97.4% of last year, and April marketings were up 97.5% of last year. The total on feed number as of May 1 was 1.5% down from a year ago, similar to last month.
“If you look at the average pre-report estimate for placements, this number is just a smidge higher but well within the range,” Dr. Peel said. “The marketings also were just a smidge higher, but also within the range. When you factor in slightly bigger placements, but also slightly bigger marketings, the on-feed total comes in just about exactly on the pre-report estimates, so there were no big surprises in this report.”
Dr. Peel noted the consistency of year-over-year declines for the past three or four months, however gradual they may be. He expects the trend to continue in the coming months.
He detailed how fed beef production is still up slightly from last year, but has slowly declined over the last six weeks, right along with non-fed beef production.
“Feedlots have done a great job over the last eighteen months of slowing down the turnover rate and keeping those inventories high,” he added. “But once you get it slowed down, then you don’t get any more benefit from that. I think we are going to start to see that at the feedlot level with smaller inventories, and that’s going to translate into more consistent reductions in cattle slaughter, particularly fed cattle slaughter.”
He mentioned the major futures reversal that happened a week or so ago, which made some think the markets had reached their peak; however, Dr. Peel knows that won’t happen until supplies are at their lowest.
“We’ve continued to see these things move higher,” he pointed out. “We may see a little bit of flattening or even a slight pullback here as we get into summer, but so far this year, the underlying tightness of supplies has been the driver, and seasonality has taken a back seat to that. I don’t look for much change in this. I think we will continue to see very strong prices for feeder cattle at all levels as well as fed cattle.”
Dr. Peel’s key takeaways from the Cattle on Feed Reports of the first quarter of the year are how the fundamentals of the past several months are beginning to take shape in the form of reduced inventories.
“We know that the feeder cattle supplies out in the country are very tight, and it’s been hard to get these consistent reductions in placements that pull feedlot inventories down,” he said. “We are doing it now, but still at a fairly slow pace.”
He detailed how the high prices of cattle are a tremendous incentive for producers to take their cattle to market. Thus far, this is allowing for greater than expected numbers in feedlots, but also means a steeper drop off in the country’s overall cattle herd.
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