Cattle inventory numbers approached record highs in the USDA’s recent Cattle on Feed report.
The inventory in feedlots with a capacity of 1,000 head or more came in at 11.964 million head on April 1, the second-largest number since 1996. Cattle numbers in December 2011 set a record at 12.11 million head.
“Now that was a Cattle on Feed report — close to record high inventories with strong placements,” says Stephen Koontz, ag economist with Colorado State University. “One week to think about it and then the futures market reacted hard.”
Koontz says all but the upper Midwest had larger inventories than 2018, with placements 5% higher than a year ago and 8% higher than in March.
“Placements in Colorado, Kansas and Oklahoma were 21%, 16% and 13% above the prior year,” Koontz writes in his In the Cattle Markets analysis. “All states detailed in the report except Nebraska, Iowa and Arizona placed animals in excess of the prior year.
“Understandably, placements in Nebraska were 11% below the prior year (due to flooding). Fed cattle will be abundant through the summer and fall.”
Despite the near-record numbers, he says elements are in place to help minimize price pressure.
“Slaughter weights remain below the prior year,” Koontz says. “The cold and wet spring has accelerated the seasonal decline in average carcass weights. Saturday slaughter continues to run strong and marketings in the report are 3% above the prior year and 5% above the prior month.
“Cold storage of beef is reasonable given available supplies. Finally, boxed beef values and the Choice-Select spread appear to be well into their normal spring rallies. Thus, the cash fed cattle trade has been strong.”
He says while this could lessen the blow, huge numbers require feedlots to move cattle through quickly.
“But the inventory of market-ready cattle, as proxied by the calculated cattle on feed over 120 days, are nothing short of enormous,” Koontz says. “Orderly and aggressive marketings through the remainder of April, May and June are essential.
“The live cattle futures complex has strong discounts in the more deferred out until December. This seasonal structure certainly appears appropriate.”