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US - USDA will publish on Friday, April 20, the results of its monthly survey of feedlots that on April 1 had more than 1000 head of cattle on feed, write Steve Meyer and Len Steiner.

Analysts polled by Dow Jones wire service ahead of the USDA report indicated that they expect the total feedlot inventory to be up about 2% from a year ago. Feedlot inventories have been declining since the beginning of the year, a normal seasonal pattern that reflects a growing gap between placements and marketings in the first half of the year. Analysts polled indicated that on average they expect the supply of cattle placed on feed during March to be 1.767 million head, 7.7% lower than the previous year while the supply of cattle marketed at 1.881 million head is expected to be down 5.5%.

Analysts polled all expected March placements to be down from the previous year, the only debate being the magnitude of the decline. The year over year decline is not that surprising given the large number of cattle placed on feed last March. As the January 1 inventory showed, the supply of feeder cattle outside of feedlots this year is smaller than the year before, reducing the stock available for placements. Also, we had more cattle placed on feed in February (mostly because of the extra day) which implies a somewhat more normal pattern in placements. Finally, and more importantly, the attitude in the cattle market this year is different from a year ago.

Negative stories in the press, high carcass weights and a sense that beef demand may be softer this summer, likely kept feedlots on the defensive. Consider that October cattle futures at the beginning of March were priced at near $135/cwt but by the end of the month had declined to $125/cwt. Giving up $10/cwt in four weeks does not induce a lot of confidence among feedlot operators and this will likely show up in the placements numbers. Corn futures for the same period declined about 40 cents, not enough to make up for the pullback in live futures.

Feedlot placements are expected to be lower from the previous year in the coming months as the industry struggles with margin pressures and tight supplies. Much will depend on weather and the availability of pasture this summer. Hay prices are now at record high levels, a topic we will expand on tomorrow, so it is critical that drought pressures ease if we are going to have any kind of growth in replacement numbers. Should weather cooperate, the availability of heifers for placement will likely decline sharply, leading to a further reduction in the number of cattle going into feedlots during the summer and fall. Feedlot marketings in March are expected to be down 5.5% from the previous year. The monthly statistics for March will be available tomorrow as well but based on daily steer and heifer estimates (note the word estimates) fed slaughter for the month was down 7.5% from the previous year. Keep in mind also that there is one less marketing day in March compared to last year and it is possible that analyst estimates may be overstating cattle slaughter