A Hard Look at the Numbers
By: Jill J. Dunkel
Aggressive placements in the March Cattle on Feed report raised a few eyebrows of actually how many cattle have been placed on feed. Strong fed cattle prices have enticed feeders to capture this market when they can. Feedlots have placed more cattle four of the past five months, resulting in nearly 600,000 more head placed compared to one year ago, according to Oklahoma State University Extension Livestock Marketing Specialist Derrell Peel. Seeing placements peak in the March 1 report is uncommon.
“In 14 of the last 17 years, the seasonal peak in feedlot inventories has occurred in December, once in January and twice in February. But never in the history of the current cattle on feed data has the seasonal peak occurred in March,” Peel states.
But peak is a relative term. “We’re still 1% below a year ago. We’re still declining in numbers,” he says. “It’s unusual as in terms of the timing.”
Peel notes that the bulge in March placements is indicative of a number of factors. This late peak in feedlot inventories could suggest either a late peak in marketings or some bunching of cattle into the seasonal peak of marketings and slaughter. It depends on the placement weight distribution, along with weather and market factors that may change the timing, Peel says. He notes that over half of the large increase in February placements included cattle under 700 pounds. Those cattle will not be on show lists until late summer.
“I think we’ve got January and February cattle this year in lieu of March cattle in terms of the Southern Plains. Wheat pasture cattle moved early, and we’re still trying to figure out the net effect of the California drought,” Peel says.
The unseasonal peak is almost sure to result in lower numbers when the April 1 feedlot inventory is released.
“I don’t think the March placements will be up at the next report. We might be close to year ago levels, but that’s probably as close as we’re going to get. It’s a question of you can have the cattle now, or you can have the cattle later. But you can’t have both. There are not more cattle out there.”
Peel says when it comes to such reports and the low levels of cattle, the industry can’t expect to continue to see year-over-year decreases. “You might see a few increases once in a while, but it’s all over a low level. A slight increase just won’t mean much.”
There’s clearly less cattle, he says, but weather could play a factor in upcoming placements.
“The only thing that can change that much at all would be if we go another two months and it’s still dry. For the fourth year in a row, the drought could play into temporarily pushing more cattle into feedyards. That doesn’t mean we will go above year ago levels, but it might keep us closer and might lead to another couple of months of relatively large placements.
“On the other hand, if we get down the road and moisture conditions get better, then it will clearly tighten up. With the herd expansion plans we have now, heifer numbers will get even tighter,” he explains.
Spring weather forecasts have been a mixed bag, with experts saying there’s a 50/50 chance an El Niño will develop. If so, that should bring welcome rains to a parched Texas and Southern Plains. However the National Oceanic and Atmospheric Administration’s long-term spring forecast suggests the drought will continue.
“Clearly we have tight supplies, and the current market pulls cattle forward,” he notes. “I think we will continue to pull cattle forward as fast as we can. But at the same time, poor weather this winter is probably slowing down performance.”
What do these placements mean for prices down the road? Peel says seasonal patterns show a drop in summer prices, but he’s not sure how big of a drop there really is in store. “It’s a roller coaster ride this year. Who knows at this point. I’m not sure seasonal patterns mean a whole lot given where we are. But if we have some seasonal pressure through the summer, it could come back and be every bit as tight as we are right now, in the fall.”