Cattle on feed numbers influenced by variety of factors
“U.S. cattle on feed down three percent,” states the latest National Agricultural Statistics Service (NASS) Cattle on Feed Report released March 19.
According to the report, feedlot placement is also down one percent from a year ago, while southern states including Texas and Arizona are closer to 15-20 percent lower. Nebraska, Iowa and South Dakota are all showing higher numbers on feed from a year ago.
“The shrinking raw supply of cattle, combined with more expensive grain and transportation costs, tends to draw feeding north and east towards corn,” explains JBS spokesperson Chandler Keys. “The downturn to that are the really bad winters in eastern Nebraska, southeast South Dakota and western Iowa that push back against those benefits. It’s a balancing act that has been happening for the last 30 years.”
Director of the Livestock Marketing Information Center in Denver, Colo., Jim Robb also feels the reduction in numbers is an indicator of the overall drop in herd numbers seen across the country.
“The long-term trend in the industry of smaller calf crops and breeding herds is starting to show up in placement and cattle on feed numbers and that is a key aspect. It’s not a surprise to see the numbers down,” says Robb.
“The cowherd is shrinking in the U.S. Then you throw in new uses for corn through ethanol and it pushes the base point on corn higher and makes it more expensive the farther you are from the Corn Belt,” adds Keys.
“Cost of gain in Kansas, Iowa, Nebraska and South Dakota is lower because those areas have access to by-product feeds and high moisture, low test-weight corn that isn’t shipped to the southern plains. This is a trend in recent months based on the economics of feed availability and cost of gain,” explains Robb.
Robb adds that winter weather in some feeding parts of the U.S. was the worst it’s been in 15 years, and the performance impacts are noticeable.
Adam Kluck works with feedlots in Torrington, Colorado, Nebraska and Texas and says the quality of feeding conditions is substantially worse than in recent years.
“Some guys in Nebraska have had a terrible time getting cattle to the plant and that has resulted in the plant having to reschedule kills because they can’t get cattle in. Highway 30 was closed eight days this winter and it’s a main line to Cargill and Excel. They just shut it down, and that never happens,” explains Kluck.
“It has been an interesting winter. We only had one or two weather-related days in Colorado, but the hard Midwest winter in combination with the moisture they received has caused a lot of problems in places like Nebraska. It’s been a tradeoff for decades in the cattle and feeding industry; the closer you are to Nebraska and Iowa the more access you have to corn. Three-quarters of the year it’s great, but if you get heavy rains, freezing and thawing like this year it can hurt cattle performance,” adds Keys.
“Winter weather has a major impact on cattle prices today. At these price levels people are retaining ownership and feeding cattle. Futures are being offered at some of the highest prices on record and should be taken advantage of,” says Robb.
He adds that unless there is a big up-sweep in demand from exports and U.S. consumers, the fed cattle market will erode this summer.
“During a recession people eat the cheapest form of protein they can. We’ve shortened up the protein supply everywhere. Beef, hog and poultry production is all down. As the amount of supply decreases, demand starts growing. Now we are starting to climb out of this recession and that results in higher cattle prices,” explains Keys.
“You try to increase the efficiency in your plants and that is where your profitability will come from; driving down cost per head to process and implementing more technology within plants,” adds Keys.
JBS is also being very aggressive on the futures market and increasing its percentage of exports.
“Our challenge is to take an 800-pound carcass that the American public wants to eat about a quarter of on a regular basis and find a way to market the other three-quarters. We see that as an opportunity to market it overseas and have dramatically increased our percentage of sales into exports,” says Keys.
Kluck adds the futures market is typically cyclical and something that should be utilized by producers.
“We haven’t seen anything like this happen before. It started a couple years ago when oil went crazy and corn and fuel followed. Everyone is on a rollercoaster and it hasn’t stabilized yet and probably won’t for a while. Our nation is up in the air and I don’t think there is a stabilizer out there. Hopefully there isn’t a shortfall.
“We need as many producers participating in the futures market as we can get. There are independent investors that want to invest in agriculture because they see it as a constant. This nation has to keep eating and they feel this is where it’s going to be. I have strong feelings about that and believe people should stay out if they aren’t utilizing the product,” says Kluck.
“If you are dealing with ready animals it is especially prudent to run a short pencil right now,” comments Robb.
Kluck adds, “Things have changed a lot in recent years for everyone due to the economy and what’s happening in this nation. Right now the trends I’m hearing are that ranchers feel things are going to continue to get stronger. That mentality may make it harder to get cattle. But it really just depends on what you want to pay. If the market gets high enough everyone will sell. It’s also dependant on the feeders’ relationship with the buyers and producers.”