USDA reported cattle and calves on feed for slaughter market in the United States for feedlots with capacity of 1,000 or more head totaled 10.0 million head on Aug. 1, 2013. The inventory was 6% below Aug. 1, 2012. A good bit fewer cattle are on feed than the average of trade estimates, which was down 4.2%.
July placements in feedlots during July totaled 1.72 million, 10% below 2012. That was well below the average trade guess of down 2.5% and actually below the bottom end of trade expectations, which ranged from down 7.1% to up 11.6%.
During July, placements of cattle and calves weighing less than 600 pounds were 390,000, 600 to 699 pounds were 275,000, 700 to 799 pounds were 455,000 and 800 pounds and greater were 602,000.
Marketings of fed cattle during July totaled 2.00 million, 4.5% above 2012 and very close to trade expectations.
Bigger fed cattle marketing hole coming
Analysts sometimes talk about walls of cattle or marketing holes coming.
The 6% decline in the August 1 cattle on feed inventory and the 10% plunge in July placements suggest a hole will come in December-March marketings. Holes in marketings fuel predictions of higher prices. Cattle owners are adept at kicking a little dirt in such holes each time they walk by. They can delay a few late fall cattle or accelerate a few spring cattle. Holes often end up shallower than early predictions, with lower price peaks.
This go around feedlots will have help kicking dirt in the hole. USDA projects first quarter 2014 pork production up 2.65 % from this year. First quarter broiler production is projected up 3.4% from 2013's first quarter.
Competition for beef will continue
This year's beef output is running about 1.4% below 2012. For all of next year USDA projects beef production will skid 5.5% below 2013.
Meanwhile, pork production is projected up 0.6% this year and up another 3.2% next year. Broiler output is expected to rise 1.9% this year and almost another 3% in 2014.
Tightening beef supplies are constructive for beef prices. Rising supplies of competing meats limit how far prices can advance. How much of a premium consumers are willing to pay for beef is the driver. That depends on job prospects, incomes and general economic outlook.
Still, USDA projects first quarter 2014 fed cattle will average in the $122 to $132 compared with $125.52 in 2013's first quarter.
Grazing to determine expansion
The nation's beef cow herd down more than 6 million cows from the recent peak of 35.3 million in 1996 means the long-term trend in slaughter cattle supply is lower. The cattle industry has been able to hold beef production relatively steady by boosting efficiency through technology, better genetics, higher calving percentages and heavier slaughter weights.
Whether cow-calf producers launch expansions in 2014 depends heavily on feed costs and grazing conditions. The latter improved in much of the country in 2013.
Producers began adopting the beta-agonist feed additive, Zilmax, in the spring of 2012. Average slaughter weights advanced 9 to 12 pounds. Despite Tyson announcing it will stop accepting cattle fed Zilmax due to animal mobility issues, the trend toward heavier cattle will continue. One reason is cost to run a 1,400 pound steer through the packing plant is the same as the cost to run a 1,250 pound steer through the plant. But the heavier steer turns out more meat, which lowers processing cost per pound.
Lower imports tighten supply
Feeder cattle imports from Mexico through mid-August were down about 45% from 2012. USDA tallies the shortfall for the year at nearly 463,000 head. Imports of feeder cattle from Canada so far are up about 65,000 head, while the total number of Canadian cattle crossing the northern border is up nearly 163,000 head from a year ago.
Still, the shortfall from Mexico leaves a net decline for cattle imports of about 300,000 head, compared with 2012. Those 300,000 cattle represent about 2.5 days of slaughter. One could argue that's not much. But the shortfall counts up when supplies are squeaky tight.