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.

US Red Meat and Poultry Production and Exports In 2018

Feb 14, 3:43 pm | Cattle, Hogs & Pork, Poultry

4** US To Produce Record Red Meat And Poultry In 2018: The February WASDE report did not make any major changes to the red and poultry estimates, with combined production fractionally lower from January. However combined meat production is forecast to increase 4% year over year, and if realized, total US meat production will be the largest on record. The largest increase for 2018 is in beef production, which is projected to increase 1,552 Mil Lbs (6%) – and record large at 27.8 Bil Lbs. Expansion in pork production is a close second, with annual output expected rise by 1,304 Mil Lbs (5%). US broiler production is also forecast to reach a new record level of 42 Bil, up 2% and the 6th consecutive year of record broiler production. The only species that looks to decline is turkey, but by less than 1%.

5** The US Will Export More Meat As Supplies Increase:  With larger meat production forecasts, the USDA expects that total meat exports will also expand in the year ahead. The greatest change in exports is expected in shipments of broiler meat, where the USDA estimates a 170 Mil Lb (3%) increase in exports. The US beef export forecast was up 1% from January and 6% over last year, with US beef exports expected to reach a record large 3,025 Mil Lbs. US pork exports are forecast to increase 268 Mil Lbs (5%) over a year ago, and will also reach a new all time record of 5,900 Mil Lbs. All combined, the USDA estimates that US exporters will ship more than 16.5 billion pounds of red meat and poultry this year. Its’ a big number, but we note that the increase in exports is simply a reflection of the larger supply. The USDA export forecast amounts to 16% of total US meat production, which is inline with the last 3 years.

6** US Per Capita Meat Supplies To Be Record Large: While exports are forecast to expand in the year ahead, they will not offset the massive increase in production. Domestic per capita red meat and poultry disappearance (supply) is forecast to increase for the 4th consecutive year, with the February forecast up 6 Lbs from a year ago at 220 pounds per capita. US consumers will again benefit greatly from larger supply, which often comes at a cost to the US livestock/poultry producer.

  Simple economic theory says that significantly increasing the supply of a commodity should have a negative effect on price. Of course what is unknown is the intensity of US demand, which has been quite strong in the previous 2 quarters. There is hope within the meat industry that the growing US economy will continue to support meat demand, along with US live animal prices and margins up and down the chain. Our view is that relative to production forecast CME hog and cattle prices for the summer are already quite rich, and we favor sales on any strong spring rallies.

Red Meat Exports In December

Feb 7, 4:41 pm | Cattle, Hogs & Pork

4** US Pork Exports Mark Record December Level: Pork exports in December were just over 514 Mil Lbs, down slightly from November, but a record large figure for the month. The December figure also put the 4th quarter total at an all time record, while the annual 2017 total was up 7% year over year, also record large. The year end totals show that Mexico was the largest destination for US pork, taking 32% of total US exports, while another 22% was sent to Japan.

  US export growth in 2017 was heavily dependent on Mexico, with total year exports increasing by just over 198 Mil Lbs (12%). Exports to S Korea rose by 118 Mil Lbs (29%), while the big disappointment was that exports to China fell by 116 Mil Lbs (23%), even as China increased it’s total pork imports through the year.

 The pork market will closely watch upcoming NAFTA negotiations, as US prices will be heavily dependent on US pork flowing into Mexico, as production reaches record levels in the year ahead. The time for NAFTA concern is during May/June.    

5** US Beef Exports Expand With Larger Production: US December beef exports were slightly better than November, and marked the 2nd largest monthly total of the year at 261 Mil Lbs. This was also a record large total for the month of December, and the 4th largest monthly export figure for any month on record. Total US beef exports for  increased by 306 Mil Lbs (12%) in 2017, largely due to an increase in exports to Japan which rose by 171 Mil Lbs (26%) from 2016. Exports to S Korea increased by 42 Mil Lbs (12%), and exports to Mexico were up 25 Mil Lbs or 15%. When it comes to beef, NAFTA partners are much more reliant on the US as the US was a net beef importer of 430 Mil Lbs from Canada, and also a net importer from Mexico for the 3rd consecutive year of 154 Mil Lbs. So far, US beef exports to China remains limited.

6** US Pork Exports Keeping Up With Production; Beef Exports Spike:  While US pork exports were record large on a product weight basis in December, the monthly figure was equal to 23% of the month’s total production, slightly above the average for the year. In other words, exports are simply keeping pace with production, but not reflecting a surge in overall trade.

  In beef, December exports amounted to 12% of US production, above the annual average of 11% and also the 2nd largest monthly total on average. Whether this is a 1 month spike, or an early hint at building demand for US beef will not be known for months. But with US red meat production figures set to reach record levels in the upcoming months, a surge in export demand is needed to maintain current high prices.

January 1 Cattle Inventory

Jan 31, 4:47 pm | Cattle

45Relative to trade estimates, the January Cattle report did not offer any major surprises. Changes to last year’s inventory totals were minimal, and the 2018 inventory numbers were generally as expected, but total cattle and calves were confirmed at a 9 year high of 94.4 Mil head. The January 1st beef cow number rose by 510,000 head (1.6%) from a year ago, as cow/calf margins in 2017 rebounded from losses in 2016. As seen in the char this the 4th consecutive year of beef cow herd expansion, which has not occurred since the early 1990’s. By state, SD  added 137,000 beef cows (+8%), TX increased it’s herd by 125,000 head (+3%), and MO added 111,000 head (+5%). In the major cow/calf states, KS cut their herd by 63,000 head (4%), and the NE herd was down 10,000 (1%).


Total feeder cattle supplies (both on and off feed) as of January 1 were up 1% from a year ago, the largest since 2011 at 40.1 Mil head. Total steers and heifers on feed jumped 7% from last year to 6 year high of 14 Mil head, while feeder cattle supplies outside feedlots declined for the first time in 3 years – due to the large autumn placement rate (Plains drought) and totaled 26.1 Mil head. The tighter feeder cattle supply is viewed as supportive for the feeder cattle, but 2018 prices are expected to be similar to a year ago. The USDA’s January annual average feeder steer price forecast for 2018 was at $140-148, versus $145 in 2017, and $143 in 2016. The only unknown is whether a growing US economy leads to continued  US red meat demand? The US will will have 10% more beef to consume this summer which is expected to push cash cattle prices below $100.00 for seasonal lows in June.