December 17, 2004

Cattle On-Feed Inventories Up in the US

The number of US cattle on feed on November 1, in feedlots with over 1,000 head capacity, was up nearly 3 percent from a year earlier. Although placements and marketings during October were both down 3 percent from a year earlier, placements exceeded marketings by about 900,000 head.

With two fewer slaughter days in October, the marketing pace was fairly strong. However, placements for the quarter are expected to decline about 5 percent due to tight feeder cattle supplies and very strong demand for over-wintering grazing systems. However, abundant moisture in most wheat grazing areas has prevented some calves from being turned out on wheat pasture. Unfortunately, many of the feedlots that these calves are in are also facing extremely muddy conditions. As usual, moisture conditions will dictate whether these calves are placed on full feed rations or turned out on wheat pasture.

Muddy feedlots and reduced gains have added another factor to already tight fed beef supplies. Poor feeding conditions and good post-Thanksgiving beef movement resulted in sharply higher fed cattle prices in early December. Conditions improved to some extent in mid-December with prices declining from near $90 a cwt to the mid-$80s. Cattle feeders and packers continue to jockey for prices, with the winner largely a function of feeding conditions and forward commitments on product.

Beef supplies are expected to remain very tight and could get even tighter depending on late fall/winter feeding conditions.