Darrell Mark, University of Nebraska ag economist, reports at www.lmic.info that the Oct. 1 cattle-on-feed inventory was record large compared to previous Octobers. At 11.385 million head, the on-feed inventory was 8.6% higher than Oct. 1, 2005. He cites drought-induced early movement of Southern Plains calves into feedlots for the record large on-feed inventories.

Overall, net placements were down 5.8% last month. This resulted from a decrease in placements weighing more than 600 lbs. of 283,000 head or 15.8%. However, placements of steer and heifer calves weighing less than 600 lbs. were up 160,000 head or 28.3%.

In recent months, yearling placements have declined relative to year-ago levels due to short supplies of heavier feeder cattle outside of feedyards (they were placed earlier in the year). The continued increase in lightweight calf placements in recent months are a result of at least three factors, he writes:

  • Drought-stressed pastures in the Northern Plains and Western states likely prompted early weaning.
  • Feeder-calf prices have fallen at least 8% (basis Nebraska) in the past month due to softer fed-cattle prices and much higher corn prices. Given the outlook for fed-cattle and corn prices, feeder-cattle prices may not improve, so some producers are taking advantage of current prices by selling calves now.
  • Cattle feeders may be trying to take advantage of feedstuffs that may be cheaper than corn in some local markets and that are more suitable for growing-calf rations than for finishing diets. For example, placements in South Dakota were up 25% in September where hay prices are $50-75/ton less than in Texas were placements dropped 10%.
"Clearly, the rapid rise in the corn market of nearly $1/bu. in the past month (basis Omaha, NE) negatively impacts feeding margins. Breakeven prices increase about $4-6/cwt for a calf-finishing operation from such a change in corn price," Mark writes.

The availability of distillers grains has insulated some areas from these corn-price shocks, he says. Though many plants price distillers grains in a fixed relationship to corn, continued rapid increase in ethanol and distillers grain production may weaken this relationship, making distillers grains even more price competitive relative to corn.

Feedyards in close proximity to ample distillers grains products can more competitively substitute distillers grains plus solubles for corn, and cattle-on-feed inventory numbers seem to reflect this, he says. Cattle-on-feed inventories are up significantly in leading ethanol-production states: Nebraska (+14%), Iowa (+12%), and South Dakota (+31%).
-- Livestock Marketing Information Center