USDA Cattle on Feed and Placements a Shade Below Trade Expectations

USDA Cattle on Feed and Placements a Shade Below Trade Expectations

USDA Cattle on Feed: Feeder cattle will hold good value; Pork and Poultry are gearing up competition; Consumers will have more choice next year.

From feedlot surveys, USDA estimated cattle and calves on feed for slaughter market in the United States for feedlots with capacity of 1,000 or more head totaled 10.1 million head on Oct. 1, 2014. The inventory was 1% below Oct. 1, 2013, and a tad below the average trade guess. The inventory included 6.46 million steers and steer calves, up 1% from 2013. This group accounted for 64% of the total inventory. Heifers and heifer calves accounted for 3.55 million head, down 3% from 2013.

USDA Cattle on Feed: Feeder cattle will hold good value; Pork and Poultry are gearing up competition; Consumers will have more choice next year.

Placements in feedlots during September totaled 2.01 million, 1% above 2013. Net placements were 1.94 million head. During September, placements of cattle and calves weighing less than 600 pounds were 460,000, 600 to 699 pounds were 340,000, 700 to 799 pounds were 437,000, and 800 pounds and greater were 770,000. For the month of September, placements are the second lowest since the series began in 1996.

Marketings of fed cattle during September totaled 1.68 million, 1% below 2013 and very close to the average trade guess.

Other disappearance totaled 65,000 during September, 5% above 2013. That uptick lends some credence to the notion that some heifers are temporarily residing in feed lots, getting bred and eventually making their way back to cow herds.

Broadening to the bigger picture. This year may well go down as the best profit year all U.S. livestock sectors ever had.

Cow-calf producers are awash in cash. Cattle feedlots have been. Easing grain prices, generally better grazing, except in California, and more abundant harvested forages trim production costs. Both fed cattle and feeder cattle prices will set record-high annual averages this year. Profits lure cow-calf producers to expand herds. However, the herd will be expanding from a relatively small level. Any rise in beef available to consumers will be a ways off. So feeder cattle will remain valuable property for the foreseeable future.

Cattle feeding opportunities do not look as good as they did, not because high feed costs are eating up profits, but rather because feed lot operators are bidding up feeder cattle prices. Plus both pork and broilers will be cranking up production to cash in on higher prices. That will make stiffer competition for beef at retail, as consumers shift among meat proteins to capture the best value for their dollars.

Cow-calf producers retaining heifers to expand cow herds will trim number of heifers going on feed, which will further tighten short-term beef supply. That's not good news for feedlots, as competition to buy feeder cattle will remain intense. It's good news for cow-calf producers. They will command the supply side of the feeder cattle market for a few years. Immediate term, it's not good news for consumers as beef promises to stay pricy, at least for a couple more years.

However, longer-term it is good news for producers of all other meat producers. It's also good news for consumers in the intermediate and longer terms as production across all species expands.

USDA Cattle on Feed and Placements a Shade Below Trade Expectations

Pork will become more competitive with beef. Despite Porcine epidemic diarrhea virus, 2014 will go down as the best profit year most pork producers ever had. USDA has conditionally approved two PEDV vaccines. If they are moderately effective, baby pig death losses due to PEDV will ease. Plus sow herd operators are becoming better at managing PEDV.

Cyclical expansion and heavier slaughter weights will keep putting enough extra pork on the market to keep down pressure on hog prices.

Broilers are gearing up. USDA projects 2015 broiler production will rise more than 3%. Broiler producers see tight supplies of pricy beef and pricy pork as price umbrellas under which they can expand production.

Broilers could be expanding faster than they actually are, were it not for the financial stress the industry faced in 2008, when feed prices shot up, margins collapsed pushing Pilgrim's Pride into bankruptcy. In response broiler company accountants wrung every inefficiency possible out of the business. They slashed breeding hen flocks that produce the chicks to eventually lay the eggs that hatch into chicks to become broilers to a bare minimum. Lack of those grandmother hens is restraining expansion.

More milk coming will trim dairy margins. Dairy producers will wrap up 2014 with the highest annual average prices on record for all classes of milk. However, dairy producers are also expanding production. USDA projects the 2015 annual average all milk price down at least 20% from 2014. Lower-priced and more abundant feeds will help contain costs, but cost savings may well lag slumping revenue from lower prices.

Lower-priced dairy products are coming. That's good news for consumers.

Lagging exports may be a price damper. Concerns about economic weakness in Asia and lagging economic growth in Europe are helping strengthen the U.S. dollar. The rising dollar makes U.S. exports more expensive in the terms of foreign currencies. That could eat into pork and dairy product exports.

Fading exports volumes would put more supply on the U.S. market, accentuating down side price pressure from other sources. That could be good for consumers, not so good for producers.

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