The U.S. Department of Agriculture (USDA) released its latest monthly Cattle on Feed report this past Friday afternoon, presenting figures that largely aligned with industry expectations. In this Beef Buzz, Oklahoma Farm Report’s Ron Hays talks with Oklahoma State University Extension Livestock Market Economist Dr. Darrell Peel, who believes these seemingly stable numbers mask a more significant, ongoing tightening of cattle supplies within the system.
The report indicated that cattle on feed for September 1 stood at 99 percent of last year’s total, a modest 1 percent decline. Delving deeper into the August activity, placements of cattle into feedlots were down by 10 percent, coming in at 90 percent of last year’s figures. Marketings in August saw an even sharper decline, falling 14 percent to 86 percent of the previous year’s level.
“This report was pretty well anticipated, so no real surprises compared to expectations in terms of the on-feed total,” Dr. Peel noted. “However, what we see is a very slow pulldown of the on-feed numbers, but the placements and marketings are down more sharply than that would imply.”
Dr. Peel explained that the overall on-feed inventory tends to obscure the underlying dynamics, indicating less cattle are actually flowing through the system than the headline numbers might suggest. He likened the feedlot inventory to a water tank: “You can keep the tank full even if there’s less water coming in your input pipe if you also choke off the output pipe enough. And that’s essentially what we’ve been doing for several months.”
Feedlots have a strong incentive to maintain inventories to keep their operations, particularly feed mills, running efficiently. To achieve this in an environment of tighter supplies, they are employing several strategies:
- Extended Days on Feed: Cattle are being fed for longer periods.
- Feeding Heifers: More heifers are being kept in feedlots.
- Placing Lighter Weight Cattle: Feedlots are acquiring and placing lighter-weight feeder cattle, which then require longer feeding periods.
This trend is also reflected in longer-term data. Over the past six months, placements have been down 5 percent compared to the same period last year, while marketings for the same timeframe were down 6 percent. This close margin explains why the overall feedlot inventory isn’t falling dramatically despite a clear reduction in the total cattle entering the system.
A contributing factor to feedlots’ ability to maintain inventory is the favorable cost of gain. “The fact that the cost of gain in feedlots with this record corn crop we’ve got happening gives them the ability to kind of chase cattle a little bit harder and go after those lighter weight feeder cattle and try to keep those feedlot inventories up,” Dr. Peel stated. With consecutive large corn harvests, the cost of feed remains relatively reasonable, easing some financial pressure on operators.
However, this advantage is significantly offset by the overarching challenge of tight feeder cattle supplies and record-high feeder cattle prices. “Where they struggle, of course, is the fact that just overall feeder supplies are tight,” Dr. Peel added. “And they’re going to have trouble holding those inventories, but they’ve been doing everything they can to do that. And of course, the cost of feeder cattle coming in is a challenge for them. We’ve had record high prices and that’s, in general, going to continue for feedlots.”
Livestock Market Economist Dr. Darrell Peel’s analysis underscores that while the latest USDA Cattle on Feed report offered few surprises on the surface, a deeper look reveals an industry actively striving to maintain operational capacity amidst fundamentally tightening cattle supplies and escalating input costs for feeder animals.
The Beef Buzz is a regular feature heard on radio stations around the region on the Radio Oklahoma Ag Network and is a regular audio feature found on this website as well. Click on the LISTEN BAR for today’s show and check out our archives for older Beef Buzz shows covering the gamut of the beef cattle industry today.
