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Inventory of fed cattle second-biggest

Inventory of fed cattle second-biggest

The U.S. Department of Agriculture’s latest Cattle on Feed report, released March 19, shows as of March 1 the number of animals on feed is 1.6 percent more than year-ago levels. The report provides monthly estimates of the number of cattle being fed for slaughter. For the report the USDA surveys feedlots of 1,000 head or more because that represents 85 percent of all fed cattle. Cattle feeders provide data on inventory, placements, marketings and other disappearance.

The report showed a total inventory of 12 million head in the United States as of March 1, an increase from the same time in 2020 but less than this past month. The 1.6 percent increase is in line with analyst expectations of feedlot inventories increasing 1.5 percent from 2020. After strong impacts from the pandemic the previous spring, the number of cattle on feed has largely followed seasonal patterns. But since August it has mostly been running at more than recent-year levels. The latest Cattle on Feed report continues that pattern, even with a month-over-month decline. The report marks the second-biggest March inventory since the series began in 1996.

As usual Texas, Kansas and Nebraska led the way in total fed-cattle numbers, accounting for more than 8 million head or about 67 percent of the total on-feed inventory in the country. Texas mostly held steady relative to 2020. Kansas and Nebraska posted moderate gains, adding 4 percent each.

Total inventories are an important component of the report but other key factors include placements – new animals being placed on feed – and marketings – animals being taken off feed and sold for slaughter. Coming in at 1.9 percent less than 2020, placements in February came in at more than the average analyst expectation of a 2.5 percent decrease. The relatively wide range of forecasts for placements – more than 9 percent – highlights the uncertainty that can exist in forecasting that specific variable.

The February winter storm that stretched throughout the country’s cattle-feeding region and crippled much of Texas, a key feeding and cow-calf state, made predicting March’s numbers particularly difficult. The weather hampered producer ability to move animals; feeder and stocker sales declined. Slower sales would negatively impact both placement and marketing numbers. Cattle imports decreased in February as well, which also could impact placements – adding to the uncertainty.

In February placements clocked in at 1.684 million head, 333,000 head less than a year ago and less than January’s increase in placements. Reduced placements may continue as long as the cost of feeding remains elevated and feeders try to keep animals off feed to an extent. In addition to the impacts corn and soybean prices are having on cost of feed, elevated wheat prices could lead to impacts on decisions to graze on wheat pastures.

The winter storm that impacted the movement of cattle impacted slaughter levels, which was reflected in reduced weekday-slaughter levels during the storm. Those slaughter impacts showed in reduced cattle marketings throughout February. Marketings came in at 1.732 million head, or 2.4 percent less than the previous year. That’s right in line with the average analyst expectation of a 2.4 percent decline from year-ago levels. Like placements, marketings also had a wide range of expectations in the report. Analyst predictions ranged from a decline of 5 percent to an increase of 6 percent.

Summary

The March Cattle on Feed report is considered relatively neutral to bullish. The decline in placements is bullish for future supplies of fed cattle but the industry mostly anticipated the decline, though they predicted a larger decline than occurred. The overall supply of cattle on feed increased moderately from the previous year. The number of animals marketed throughout February is less than a year ago, but right in line with expectations.

Looking forward, the questions of COVID-19 cases and vaccine distribution remain key. Most of the United States is looking at warmer weather moving forward, which means giving many restaurants a lifeline with the revitalization of outdoor dining. Depending on when the warmer weather hits, many consumers will be looking to fire up their grills. We can expect a seasonal bump in demand at the retail level as well.

Michael Nepveux is an economist with the American Farm Bureau Federation’s Market Intel. Visit www.fb.org/market-intel for more information.

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