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Dry Weather Continues To Force Cattle Into Feedlots

26 May 2011

US - USDA-NASS released the May Cattle on Feed report on 20 May. Cattle continued to pour into feedlots in April, with cattle and calves on feed in feedlots with capacity of 1,000 or more head totaling 11.2 million head on May 1, up 7.4 per cent from last year. The trade had estimated a 6.5 per cent increase from last year, writes Tim Petry, Livestock Economist at North Dakota State University Extension Service.

Possibly the biggest surprise was the number of feeder cattle placed on feed during April. The trade was expecting about 4.3 per cent more placements, but the 9.9 per cent higher placements indicated in the report were higher than most expected. The increased placements came from several sources. Cattle placed in April weighing less than 700 pounds were up 13.4 per cent from last year, which seems high given that feed costs have surged over 100 per cent from last year at this time. Extremely dry conditions in many parts of the Southern Plains forced calves to move from grazing into feedlots earlier than normal. The dry conditions extend down into Mexico as well. That, coupled with historically high prices, has caused more feeder cattle imports from Mexico this year. For the week ended May 14, a total of 549,441 Mexican feeder cattle had entered the US in 2011, about 26 per cent more than last year. Many of these cattle likely went directly into feedlots this year rather than to grazing which would occur in a typical year. April placements in Oklahoma were up 33 per cent, followed by Texas increasing 27.5 per cent, and Kansas adding over 20.5 per cent; which confirms that the dry weather in the Southern Plains has forced calves into feedlots. More dairy calves have been placed on feed this year as well, with calf slaughter down almost 11 per cent for the year. April placements in important dairy states included Arizona up 56 per cent, Idaho 26 per cent higher, and California increasing 6 per cent.

Higher placements occurred in January, March and April with February being the only month with slightly lower placements than last year. Seasonally, placements usually increase in May and continued severe drought conditions in the Southern Plains and lower calf slaughter could support an increase. Placements usually decline seasonally in June. Likely, less feeder cattle will be available in the future due to the smaller calf crop, but weather conditions will continue to be a wild card. Currently, weather conditions in the Northern Plains are favorable for grazing. Last week, I drove East to West across the entire state of North Dakota and surplus moisture conditions were evident on the entire trip. This bodes well for pasture and range conditions, but crop planting progress remains well behind normal. In far Western N.D., seeding would typically be complete by now but it is just getting started. And in the last few days the Western one third of N.D. and the Eastern one third of Montana received another 1 to 3 inches on rain.

The Markets

The fed cattle market continued to exhibit seasonal weakness from the high recorded at the beginning of April. 5-area feed steer prices on a liveweight basis averaged $108.35 per hundredweight, down $4.81 for the week and off $14.81 from highs posted in early April. However, prices were still $11.32 higher than last year at this time. Dressed weight prices also lost ground and averaged $176.72, down $6.40 for the week. Choice boxed beef prices increased 29 cents/hundredweight to $176.82. Sales volumes were active on the middle meats with buyer interest for the upcoming Memorial Day holiday. 700-800 lb. feeder steer prices in Montana, Nebraska, and Oklahoma declined with the weakness in live cattle futures and increasing corn prices. 500-600 lb. steer prices were uneven with many markets reporting seasonally low supplies. Corn prices in Omaha on Thursday surged 68 cents a bushel higher for the week to $7.43, on continued uncertainty surrounding the prospects for the size of the 2011 corn crop. Both dry and wet distillers grain prices also increased with the higher corn prices.

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