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Government Shutdown Limits Feedlot Discussion

17 October 2013

US - Chicago analysts are not expecting the usual monthly feedlot discussions to ignite this month due to the government shutdown.

Steve Meyer and Len Steiner have said that the data will have an October-shaped hole in it. 

The October survey also provides the quarterly estimates of the number of heifers going into feedlots, writes Mr Meyer and Steiner. 

We will now have to wait until January for an update on heifer placements. This was one of the more important feedlot inventory reports but for now, we will have to contend with the analyst projections and what they imply for cattle marketings in Q1 of 2014.

The regular survey of market analysts conducted by Dow Jones shows that on average they expect the total inventory to be down 7.3 per cent from the previous year. Generally the analyst estimates are relatively close to the USDA number although in any given month there will be some variance.


The bottom chart to the right shows the monthly variance between the USDA actual inventory estimate and the pre-report estimates. As the inventory estimates are often viewed as percent of prior year, the variance is also a percentage point difference.

For instance, ahead of the September report, analysts on average expected the total cattle on feed inventory to be 93.5 per cent of last year’s level. The USDA survey number came in at 92.8 per cent, so the difference is 0.7 per cent point. Since January 2012, the difference between USDA and analyst estimates has averaged only 0.2 per cent points.

In some months, however, we have had differences of over 1 per cent but those tend to be rare. If analysts are correct and feedlot inventories are 7-8 per cent below year ago levels, this would imply a very significant reduction in the number of cattle coming to market in Q1 of 2014.

Slaughter will be further constrained by the limited availability of cull cows. Last year, cattle futures rallied sharply at the end of the year on expectations that high feed costs would negatively impact cattle performance and reduce the supply of beef coming to market.

But with new feed additives providing better conversion rates, beef production in Q1 of 2013 was down only modestly, forcing a major correction in cattle prices. This year, however, we are going into the winter months with significantly fewer cattle on feed and also with Zilmax sales suspended.

Feed costs are indeed much lower but that may not matter if you don't have the cattle to feed. The recent spike in feeder cattle prices was a reminder that feeder cattle supplies remain tight. On average analysts expect feedlot placements up only 1 per cent in September. After three months of sharp reductions in placements, one could argue that a few more feeders were likely available to place in September. 

Imports of Mexican feeder cattle were down in September but only by about 5000 head.

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