Beef Inventory Expected to Drop

6/22/2013 7:00 AM

The USDA will provide its regular monthly update on cattle inventories in feedlots with +1000 head capacity on June 21. As has been the case for the past 9 months, the latest survey is expected to show that the number of cattle on feed on June 1 remained below year ago levels.

Analysts polled by Dow Jones newswires ahead of this report on average indicated that they expect the total inventory to be down 3.5 percent compared to June 2012. This implies a feedlot inventory of 10.689 million head. On May 1, feedlot inventories were pegged at 10.735 million head, 3.4 percent less than the previous year. As is usually the case, market participants will focus closely on the overall number of cattle placed on feed during May as well as the composition of the cattle going on feed. On average, analysts expect placements to decline 4.1 percent compared to 2012 levels.

Placements in March and April were larger than the previous year as dry conditions in a number of areas forced producers to send cattle to market earlier than normal. Also, a backlog of feeders that was created late last year and early in 2013 increased the number of cattle available for placement in early spring. The March and April increase in placements likely reduced availability for May placements.

Also important to consider is the decline in the number of feeder cattle coming from Mexico. In April 2013, Mexican feeder cattle imports made up about 15 percent of placements in feedlots in five southwestern states. Imports of feeder cattle from Mexico in April were down 42 percent from a year ago.

Mexican producers have sharply reduced the number of heifers they ship to the U.S. market. In the first four months of the year, Mexico shipped 392,310 head of feeder cattle to the U.S., 27 percent less than a year ago. Shipments of heifers were down 52 percent from a year ago while shipments of male calves were down 17 percent from a year ago.

Feeder cattle imports from Canada were sharply higher than a year ago in the first four months of the year (they were lower in May). In the first four months of the year, US imported about 120,832 feeder cattle from Canada, 80 percent more than a year ago. Still, in the first four months of the year we have seen a net decline of more than a quarter million feeder cattle coming to the U.S. from our neighbors to the north and south.

September and December corn prices actually increased in the second half of May. On the other hand, October live cattle futures lost some 400 points between the beginning and the end of May. Cattle marketings are expected to be down 2.1 percent in May. This is consistent with the preliminary steer and heifer slaughter numbers we have for May. May estimates peg steer and heifer slaughter for the month at 2.217 million head, down 2.5 percent from a year ago.

Keep in mind that the slaughter number will be larger than the above feedlot marketing estimate as feedlot numbers only cover operations with capacity of +1000 head or more.

Source: Pa. Center of Beef Excellence

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