Smaller Cowherd Impacts Feedyard Inventory

Friday's Cattle on Feed Report surprised most analysts with marketings higher than expected and placements lower. Ron Plain at the University of Missouri says part of the reason for the increase in marketings was an extra slaughter day during the month. But the bigger surprise was in the placements.

Analysts estimates pegged placements at 7.7% higher than last year, however, the number came in nearly 1% lower than the previous year's placements. The thought was that more cattle movement due to drought in the Southern Plains would translate into more cattle placed on feed. That, however, didn't happen as anticipated. Instead, analysts Steve Meyer and Len Steiner, who publish the CME's Daily Livestock Report, explain that the smaller cowherd, and subsequent smaller calf crops, are impacting feedyard inventories.

"The USDA September 1 on feed inventory was about a quarter of a million head smaller than pre-report estimates indicated. The number of light feeder cattle (under 600 pounds) placed on feed in August was up 220,000 head or 44% compared to a year ago. About two thirds of the increase in light feeder placements came from Texas. But the effects of a smaller calf crop are starting to show up. As producers have been placing cattle on feed earlier than normal, the August supply of heavy cattle available for placement was a lot tighter than a year ago. Across the board, we saw a significant decline in the number of heavier cattle placed on feed."

Pro Farmer's marketing analysts Julianne Johnston says lighter weight cattle will take longer to reach the slaughter weights, and it is unlikely that feeders will feed expensive corn any longer than necessary. So lighter slaughter weights could be coming down the road. Dressed cattle weights are already 8 pounds below the same time last year, and that will further tighten supplies of Choice beef.

All in all, this spells opportunity for beef producers. Listen to more from Johnston's Cattle Market Wrap Up on Friday.