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Published September 09, 2013, 10:35 AM

August Cattle on Feed report bullish

There were 10 million head of cattle on feed in U.S. feedyards with greater than 1,000 head capacities on Aug. 1, according to U.S. Department of Agriculture’s monthly Cattle on Feed report released on Aug. 23.

By: SDSU Extension Service, SDSU Extension Service

BROOKINGS, S.D. — There were 10 million head of cattle on feed in U.S. feedyards with greater than 1,000 head capacities on Aug. 1, according to U.S. Department of Agriculture’s monthly Cattle on Feed report released on Aug. 23.

“That is almost 6 percent below a year ago and below industry expectations,” says Darrell Mark, adjunct professor of economics at South Dakota State University. “Although this is the 12th consecutive month of year-over-year declines in the on feed inventory, the Aug. 1 drop likely marks the beginning of several months of sharply lower cattle on feed numbers.”

Cattle feeders marketed 2 million head of cattle during July, or about 4.5 percent more than in July 2012. This increase, which contributed to the lower cattle on feed inventory on Aug. 1, was relatively close to pre-release expectations.

“Because July 2013 had one more marketing day than July 2012, average daily marketings this July were almost identical to last year,” he says.

Highest marketings pace yet for 2013

The steady marketings along with the declining number of cattle on feed has resulted in marketings as a percentage of the number of cattle on feed to increase to 19.3 percent, which Mark says is up from 17.9 percent a year ago and the highest marketings pace yet for 2013.

“Marketings as a percentage of cattle on feed have generally been higher this year as a function of cattle feeders placing more heavy yearlings on feed and fewer calves, thus shortening the number of days on feed that cattle are fed,” he says.

That trend towards placing proportionally more heavy feeder cattle and fewer lighter cattle on feed continued in July. Cattle feeders placed about 665,000 feeder cattle weighing less than 700 pounds during July, which was 160,000 head or almost 20 percent less than last year.

“This year’s improved pasture and range conditions have not forced early weaning to the extent that it did for the last two years, thus lowering the number of calves being placed in July and August this year,” he says.

Placements also below industry expectations

Mark adds that cattle feeders placed 1.057 million feeder cattle weighing more than 700 pounds in July, down only 40,000 head or 4 percent from last year. Still, total placements sharply declined in July. USDA reported that cattle feeders placed only 1.722 million head, which was down 10.4 percent from last year and well below industry expectations.

“Of note, July 2012 placements were down sharply, as well. So July 2013 placements were down nearly 20 percent compared to July 2011 and almost 8 percent below the five-year average. In addition to high feed costs last month limiting placements this July, sharp reductions in feeder cattle imports from Mexico contributed to about a fifth of the decline in placements this year,” Mark says.

Overall, Mark says the market reaction to the sharply lower placements, lower cattle on feed inventory and steady average daily marketings figures was bullish. The numbers provide the most support for improved fed cattle prices in the November 2013 to February 2014 timeframe.

“Continued reductions in cattle on feed numbers could help push slaughter cattle prices to $130 per hundredweight or slightly higher by year’s end. However, higher placements of calves this fall — if new crop corn prices remain low — could put more pressure on fed prices late next spring and early summer,” he says.

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