“There were no major surprises in the report but it could be considered mildly bullish with placements on the low end of expectations,” wrote Oklahoma State University Extension Livestock Marketing Specialist Derrell Peel in the Cow/Calf Corner newsletter. Nevertheless, this is the second month of year over year increases in feedlot placements, a trend that will continue as feeder supplies continue to grow in the coming months.
The latest Cattle on Feed report showed feedlot inventories on April 1 of 10.853 million head, 100.5 percent of year ago levels. March feedlot marketings were 107 percent of last year and placements were 104.6 percent of year earlier placements. There was one more business day in March 2016 compared to one year ago.
Peel also noted all of the increase in March placements were feeders over 700 pounds. These cattle will hit the market mid to late third quarter and in the fourth quarter of the year.
Looking at the quarterly breakdown of steers and heifers on feed, Peel noted the total inventory of heifers on feed on April 1 was up 4.5 percent year over year, which was the first increase in quarterly heifers on feed inventory in 14 quarters, since July of 2012.
“This likely reflects both a growing heifer supply and some slowdown in heifer retention,” Peel wrote. “Herd expansion is likely still occurring, but at a slower pace in 2016.”
In contrast, the inventory of steers in feedlots on April 1 was down 1.3 percent from one year ago. This is the first year over year decrease in quarterly steer inventory in feedlots since July 2014.
“While the survey results were a bit more bullish than expectations, we are not sure it is enough to change the bearish view of the current cattle market,” the analysts in the Daily Livestock Report, published by Steve Meyer and Len Steiner Inc.
They noted plentiful protein supplies, anemic beef export demand and sticky retail prices the market is now encouraging the feeder to accelerate sales, pushing prices down in the process.
Cold Storage
USDA reported the supply of beef, pork and poultry in cold storage at the end of March was 2.235 billion pounds, 0.7 percent lower than a year ago and 1.2 percent lower than the previous month. In four of the last five years March inventories increased from the previous month. Only in 2014 inventories were down.
“The fact that inventories declined should be seen as positive for prices going into the high demand spring period,” according to the DLR.
Peel, however, pointed out that cold storage inventories of beef represent a minimal pipeline level of supplies in the industry from month to month. The average monthly supply of beef in cold storage in 2015 was less than 2 percent of total beef disappearance for the year.
“The build-up of cold storage in 2015 was a useful indicator of sluggishness in beef movement (especially certain products) and large beef imports but was not, by itself, a major supply factor,” wrote Peel.