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CME: Latest COF Report Reveals Numbers In-line with Pre-report Estimates

29 May 2018

US - USDA’s National Agricultural Statistics Service (NASS) released the monthly "Cattle on Feed" report on Friday, 25 May 2018, reports Steiner Consulting Group, DLR Division, Inc.

The report detailed April’s placements and marketings by feedlots with a capacity of 1000 head or more. The numbers were in-line with pre-report estimates, year-over-year April placements were down, and animals marketed were up.

The number of Cattle on Feed as of 1 May was 105.1 per cent of a year ago. Placements came in at 91.7 per cent of a year ago, and marketings were 105.9 per cent of 2017's. (Note that there was one more slaughter day in April 2018 versus a year earlier.) A key takeaway from the report is that the placing of lighter weight cattle into feedlots had slowed significantly for the second month in a row.

Animals placed in the under 600 pounds and the 600-700 pounds categories both saw substantial declines compared to a year ago of 8 per cent and 9.8 per cent, respectively. But the most significant drop was in the 700-800 pound category, which fell 15 per cent.

Daily average marketings continue to be healthy, indicative of good demand by packers for animals. May and June tend to have the most head marketed per day, and 2018 is expected to be no different.

The number of cattle on feed is now seasonally declining. Moving into summer, there should be a significant drop in feedlot inventory. April and May showed an inflection point from the linear up-trend that dates back to November 2017.

Packer margins remain strongly positive heading into summer and are supportive of them buying more fed cattle than a year ago. Based on steer and heifer slaughter data, and estimates, it appears that fed cattle marketed during May of this year should come in about 4 per cent above 2017’s. Forecasts for June are for average daily animals sold to be near to slightly above last year’s level.

Cattle feeding margins, on the other hand, are deteriorating quickly. The spread between feeder cattle and live cattle pricing has been a headwind regarding feedlots placing animals on-feed. That situation may continue for a few more months.

So, the 1 August 2018, count by NASS could be 2 per cent to 3 per cent above a year ago. That year-over-year increase could further shrink as of 1 September. Compared to where this year began (as of 1 January 2018 the number of cattle on-feed up 8.3 per cent from the prior year’s), those would be dramatic declines in the year-over-year percentage increase.

Below is a production and cash price summary compiled from various reports by the Market News Division of USDA’s Agricultural Marketing Service. We highlight feedstuff costs for livestock producers — the Omaha corn price last week was 12 per cent above a year ago, while soybean meal was up nearly 29 per cent.

You can view the full Cattle on Feed report by clicking here.

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