Analysis: Cattle

March Cattle on Feed Report

Mar 23, 5:02 pm | Cattle


4bThe March Cattle on Feed report was slightly bearish relative to pre report expectations. Feedlots told NASS that as of March 1, they had 11.7 million cattle on feed, 109% of last year versus expectations of 108%. This was the largest on feed total in 4 years, and the 2nd largest of the last decade. The report is expected to keep cattle futures under pressure, but with June cattle within $1 of our target, we caution against turning overly bearish now.

February feedlot placements were at 107% of last year versus the expectations for 104%, and the difference was about 52,000 head more cattle placed than were expected. Kansas cattle feeders moved 420,000 head into their yards, which matched the all time February placement rate that was set back in 2009. Farther north in Nebraska, feedlots placed 440,000 head during the month, a 4% increase over 2017 and the largest February placement total on record. The largest increase was noted in Texas, where the placement total was 25% larger than a year ago, at a 4 year high.


6The feedlot marketing rate matched the slaughter total and was at 101% of last year. Total steer and heifer slaughter declined from January, with 2 fewer working days in the month though the per day total was also 4% lighter. But compared to a year ago, the total slaughter was up 1%, and the largest in 7 years at 1.86 million head. Note in the chart that slaughter rates tend to increase into the summer, and given on feed totals weekly kills are expected to hold at multi year highs in the upcoming months, which along with above average carcass weights is expected to yield record large beef production totals. Supplies in the coming months will be massive, while the percentage of carcasses making top grades remains record high. This looks to limit the seasonal beef market rally, and keep cash cattle prices under pressure into late summer.

US Hay Production, Stocks, And Price

Feb 28, 3:27 pm | Cattle, Corn, Feed

4US hay production peaked in the late 90’s and has been in steady decline since, particularly in the Corn Belt region. Midwest livestock herds have declined and the profits of competing crops more easily bid marginal acres away. However, tighter budgets last year saw a slight increase in hay acres, especially across the Great Plains states, that collective increased hay acreage by 410,000 acres. However, hay yields across the Plains and Midwest were lower, with ND yields dropping 22% year over year, while yields in SD were off 13%, and there was a 16% decline in TX yields. In the Cornbelt, yields declined in every state, except IL. Regional production was off 6% in the Western states, just 2% lower across the Great Plains, while hay production in the S Plains fell 11% year over year.

5NASS estimated total hay acres in 2017 at 53.8 Mil Acres, a less than 1% increase from the previous year, but the 2nd increase of the last decade. However that slight increase in production was more than offset by a drop in the national average hay yield. Total US hay production at 131.5 Mil tons was the lowest since the 2012 drought, and the 2nd lowest total since 1980. Back in January, NASS reported that December 1st hay stocks were off 10% from a year ago at 86 Mil tons, or the 2nd lowest total since 1977. And while stocks are historically tight, the first cutting of hay for much of the US is still months away. The chart shows Dec-May hay usage has averaged near 69 Mil tons since 2012, and totaled 71.5 Mil tons a year ago. A similar usage rate this year would draw May 1 stocks back near the record low that was set in 2013, following the 2012 drought.

6In early 2017 the US national average hay price was near even with the national average corn price. However, hay prices spiked last spring as the N Plains drought began to intensify and it became clear that US forage supplies would be in decline. Hay has held a $20-25/ton price premium to corn, with the Feb Agriculture Price report on Tuesday showing a national average all hay price of $139/ton versus the corn price of $117.50/ton ($3.29/bu). Compared to a year ago, the largest increase in all hay prices was noted across the Central and Northern Plains states, where prices ranged from 116% of a year ago in N Dakota, to 140% of last year in both KS and SD. New crop hay supplies and pasture availability are still several months and we expect hay prices will maintain premium to corn, at least until new crop supplies come available.

February Cattle on Feed

Feb 23, 4:13 pm | Cattle


4bThe results of the February Cattle on Feed report is viewed as bearish for CME trade early next week. The January placement total was well above expectations, which put the February 1 on feed total slightly above estimates. Ahead of the report, the average expectation was for an on feed total at 107% of last year, while the actual figure was 108%, or a difference of about 93,0000 head.   


5Once again, it was the monthly placement total that offered the surprise in the monthly on feed report, with a placement rate of 104% of a year ago versus expectations of 100%. Feedlots also placed 141,000 head more than were marketed, which took the inventory total to the largest level since March of 2012. Placements in the major feeding states were unchanged from a year ago in both Kansas and Nebraska, while placements in Texas were at 111% of last year for the largest January figure in 4 years. Placements in Iowa were at 102% of last year and also the largest January placement total for the Cornbelt state on record. Compared to December, total placements were up 15%; however, there is a big spike in the number of heavy weight cattle placed. The average estimated placement weight is 722 lbs, 21 Lbs heavier than in December but just 4 Lbs heavier than a year ago.

6The feedlot marketing rate was right at expectations at 106% of last year, or 1.858 million head, which also aligned with the monthly Livestock Slaughter report data that had been released on Thursday. Total steer/heifer slaughter for the month was reported at just over 2.13 million head or 122,000 head more than a year ago. The slaughter total was 6% larger than a year ago, though, there was 1 additional working day during the month, and the average per day slaughter was just 1% larger.

  The last several On feed reports have produced big moves in the cattle market, and our expectation is that this report will pressure the trade early next week. The cash market through the 1st quarter has gone $5-6 higher than we had expected. However, we think the outlook is for the next several quarters is more bearish and we continue to advise sales on rallies.