May Cattle on Feed Report shows April placements up 15 percent

BROOKINGS – USDA released its May Cattle on Feed report May 17. According to the report, April placements were much higher than a year ago, says Darrell Mark, Adjunct Professor of Economics at South Dakota State University.

“USDA estimated April placements at 1.75 million head, 15 percent higher than in April 2012,” said Mark. “Interestingly, this was only slightly higher than the average pre-release expectation, but those expectations varied widely.”

According to USDA’s placements data, the largest year-over-year increase in placements occurred for the heaviest feeder cattle. Placements of cattle weighing more than 800 pounds were up 21.3 percent compared to last year. Cattle feeders placed 19.7 percent more cattle weighing 700-799 pounds this April. Placements of 600-699 pound and less than 600 pound feeder cattle were up 8 percent and 5.6 percent, respectively.

“This second consecutive month of larger-than-a-year-ago placements is somewhat puzzling amid the tightening supply of feeder cattle from last year’s historically small calf crop,” he said. “Recall that March 2013 placements were 6 percent higher than in March 2012.”

Mark says several factors contributed to the 15 percent increase in April placements.

First, the year-over-year comparison is sensitive to placements last April. In April 2012, cattle feeders placed only 1.521 million head, the smallest April placements since the current Cattle on Feed data set started in 1996.

“A moderate increase in this April’s placements was to be expected based on last year’s drop in placements. April 2013 placements are 2 percent lower than in April 2011 and only 8 percent larger than the previous 5-year average,” Mark said.

Another factor contributing to the placements jump in April was lower corn prices. Corn prices, basis Omaha, Neb., averaged $6.79 per bushel in April 2013, 71 cents per bushel less than in March.

“While this didn’t push projected breakevens on placements into the black, it reduced the losses feedyards were experiencing. Likely, this provided the wherewithal to pull placements forward as feeder cattle supplies are expected to further tighten this summer,” he said.

While yearling steer prices were relatively constant in March and April this year, they were off from their highs earlier this year. And, they were more than $15 per hundredweight lower than at the same time last year.

“Finally, April 2013 had one additional business day than April 2012, which could account for three to five percentage points of the year-over-year increase in placements,” he said.

USDA reported April 2013 fed cattle marketings at 1.855 million head, about 2.2 percent higher than a year ago and close to pre-release expectations. When adjusting for April 2013 having an extra marketing day, average daily marketings were down 2.4 percent.

“Marketings as a percentage of the cattle on feed inventory were higher than a year ago, indicating relatively good turnover of cattle in feedyards,” Mark said.

USDA pegged the May 1, 2013 total cattle inventory – in feedlots of 1,000+ head capacities – at 10.735 million head, 3.4 percent less than a year ago and close to expectations.

April Placements in South Dakota Cattle Down 13 percent

South Dakota had 225,000 head of cattle on feed – again, in feedlots with more than 1,000 head capacities – which is 8.2 percent less than a year ago, says Mark.

“Placements saw the largest percentage drop in South Dakota amongst the major feeding states again this month,” he said.

At 28,000 head, South Dakota placed 13 percent fewer cattle in April 2013 compared to a year ago.

“It’s possible that more of South Dakota’s cattle are being placed and fed in smaller feedlots – those with less than 1,000 head capacity – that are not included in the monthly Cattle on Feed report surveys as there was some incentive for farmer-feeders with silage from last year’s corn crop to feed a few cattle this winter and spring,” he said. “However, data to verify this is only available once a year in January.”

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