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CME: USDA Release Feedlot Survey Results

21 June 2011

US - The USDA released on Friday, 17 June the results of its monthly survey of feedlots that as of the first of June had +1000 head of cattle on feed, write Steve Meyer and Len Steiner.

The survey will likely be construed as bullish by futures markets as they open on Monday given the sharp decline in the number of cattle placed on feed and better than expected marketings during May.

Below are some of the results:

  • Total inventory of cattle on feed as of the first of June was 10.928 million head, 4.1 per cent higher than a year ago but notably lower than the 11.2 million head that were on feed on the first of May. Pre-report estimates were looking for inventories to be about 5.5 per cent higher than the previous year.

  • The USDA survey showed that feedlots placed only 1.810 million head of cattle on feed during May, about 220,000 head or 10.8 per cent fewer than the same month a year ago. Prereport estimates were looking for a 7.5 per cent reduction in placements.

  • Marketings in May were 2.002 million head, 7.3 per cent higher than a year ago and much higher than pre-report estimates looking for a 3.2 per cent increase.

The latest survey of US feedlots will likely be viewed as moving upwards for deferred cattle contracts but it is hardly surprising considering the sharp swing in cattle prices and feed costs during mark.

As the chart below shows, the surge in cattle placements in April was mostly due to cow-calf operators accelerating their marketings due to drought in the Southern Plains and the lack of available feed.

Cattle placed on feed in April were 161,000 head higher than a year ago but then they declined 220,000 head in May.

Placements in June and July will likely be quite restrained as feedlots are finding it increasingly difficult to realise a positive margin.

The recent turnaround in cattle prices will likely provide a measure of relief but live cattle prices are still far from where they should be in order to encourage placements. And then there is the issue of feeder cattle supplies.

With the smallest calf crop in over 50 years, feedlots will finding it increasingly difficult to find feeders that have breakevens that are anywhere close to acceptable levels.

There is plenty of uncertainty about the path of the economy going forward. While most economists continue to believe that the economy is not headed for another recession, the fact that talk of a double dip is gaining ground should cause feedlots to pause and think hard before placing un- hedged cattle on feed this summer.

Further Reading

- You can view the full report by clicking here.

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