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CME: Decline in March Feedlot Placements from a Year Earlier

07 May 2018

US - Weekly data on feeder cattle sales volumes collected by USDA-AMS (Agriculture Marketing Service) and summarized on web page SJ_LS850 is pointing to a second month in a row of year-over-year declines in feedlot placements, according to Steiner Consulting Group, DLR Division, Inc.

According to USDA-NASS (National Agricultural Statistical Service), feedlot placements in March declined by 9 per cent from a year earlier. The weekly feeder cattle market data collected by USDA-AMS has been a good barometer of the direction of feedlot placements on a monthly basis.

USDA-AMS breaks out feeder cattle trade volume through three channels; traditional auction facilities, direct trade, and video/internet technology. Auction trade typically accounts for 80-85 per cent of the total volume and tends to have the highest correlation to monthly feedlot placements.

In March, auction receipts were down 8 per cent from a year earlier compared to the 9 per cent decline in placements. Weekly receipt trends do not track with placements that closely every month, but it is impressive when they do. The following graph shows that most of the decline in trade volumes relative to a year earlier came in the last half of the month.

The decline in weekly trade volume bottomed out in the first week in April and then rebounded sharply. Still, receipts were below year earlier volumes in two of the four weeks of April. The monthly receipt total for auction markets was down 6 per cent from April 2017. By itself, the first week in April registered a 37 per cent decline from a year earlier while the last three weeks of the month were up 4 per cent.

Referencing all three marketing channels in the USDA-AMS report, the April monthly total of receipts were down 15 per cent. Receipts of feeder cattle moving through direct trade were down 21 per cent from a year ago in April.

Weekly receipt data shows moderating movement of heifers through feeder cattle marketing channels. This was notable in March and has continued through April. The monthly Cattle on Feed report showed heifer inventories on feed as of 1 April up 14 per cent from a year earlier, but this compares with a 16 per cent increase on 1 January.

The big increase in female cattle slaughter so far this year (heifers up 4.3 per cent and beef cows up 10.5 per cent during the first quarter) has raised concerns about how much more expansion will be seen in the cattle herd. Last year, the beef cow herd increased by 500,000 head, a 1.6 per cent increase.

This year, Livestock Marketing Information Center is looking for an increase of about half a per cent. A slowdown in the pace of heifers moving to feedlots is consistent with sustained, albeit slower, expansion in the beef cow herd.

Price relationships between feeder cattle weight groups are shifting to encourage some moderation in heifer marketings. Premiums on calf prices relative to yearlings had dropped to the lowest levels since 2011 late last year as yearling prices were bid up aggressively by feedlots.

This situation persisted into this February, encouraging young heifers to be marketed as feeder cattle instead of being held for breeding purposes. Markets shifted in March as yearling cattle prices declined $7/cwt while calf prices dropped only $1/cwt (basis the Oklahoma City auction).

Daily Livestock Report - Copyright © 2008 CME. All rights reserved.

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