The straight economics still favor placing cattle in feedlots at higher weights but Mother Nature is forcing some cattle into lots much earlier than would be desired.
Monday’s edition of Daily Livestock Report erroneously stated that November placements of cattle weighing less than 600 lbs. increased 34% and implied that the number was relative to last year. There was a “34%” in our spreadsheet, but it indicated that those lightweight cattle comprised 34% of total placements.
That number is indeed large relative to the historical percentage of total November placements that weigh 600 lbs. or less, but it’s actually smaller than the 37% of November 2011 placements that fell in the lightest category of the USDA report. Both years, of course, are larger than normal due to poor pasture conditions.
This year’s big driver is continued dry conditions in the wheat pasture regions of Texas, Oklahoma and Kansas. The normal practice of placing spring calves on wheat pasture in November was precluded by poor moisture and wheat conditions and the calves had to go somewhere. With limited grass availability, feedlots were about the only alternative.
But the 645,000 head of lights placed in November is actually 14% FEWER than were placed last year. The 453,000 head of 800-lbs.-and-over cattle placed in November was 10% LARGER than last year. The straight economics still favor placing cattle at HIGHER weights but Mother Nature is forcing some cattle into lots much earlier than would be desired. We’ve said it many times: What the cattle industry WANTS to do and what Mother Nature ALLOWS it to do are frequently two very different things!
All this discussion of placement weights got us to wondering about the historical patterns and what they might tell us about the future. Obviously, $7-plus corn and wide swaths of drought conditions in traditional cattle country wreak some havoc with these relationships but we would be loathe to believe that history should be ignored. Some takeaways about the chart at right:
- The long-term downtrend in total cattle numbers is obvious. Where monthly placements once frequently exceeded 2.5 million, and occasionally hit 3 million head, they haven’t exceeded 2.5 million in any month since October 2007.
- Part of that reduction is simply smaller calf crops and thus fewer cattle available. But another aspect is a seasonal smoothing of placements with the high months getting smaller and the low months getting larger. This can be seen most clearly in the years prior to 2008. The jump in feed costs in 2008 stopped the uptrend for a couple of years but we’ve seen the lows for monthly placements again increase over the past couple of years. Drought conditions have been a contributor but it appears that the seasonality of the feeding complex has certainly been reduced.
- The number of cattle placed at heavier weights has grown over time. Where 800-lb.-plus cattle averaged 487,000 head/month and 24.5% of total placements from 1996 through 2008, they have averaged 548,000 head and 28.5% of total placements since then. Higher feed costs have provided ample incentive to put more lower-cost pounds on cattle before they get to the yards.
Plenty of feedlot capacity has allowed those cattle to stay on feed pretty much however long the feeder wanted to keep them. And, finally, heavier cattle are generally more profitable for both feedlots and packers. All of those have created incentives for heavier end weights and thus allowed for – or even driven – heavier placements weights.
The final factor in this growth in the number of heavy cattle is simply performance. Today’s calves grow faster than ever before, meaning that cattle of a consistent age will be heavier. The advancements in genetic selection for milk production in beef cows and calf growth rates, the availability of EPDs and their use by professional cattlemen have all improved early-age performance and thus placement weights.
- The variation in placements of cattle in the lightest weight category has also declined – at least during “normal” weather conditions. Steadily rising low-number months and falling high-number months was the rule through 2009. That pattern was, like the heavyweight placement numbers, impacted by higher feed costs. But it was pretty much destroyed by the 2011 drought in Texas and Oklahoma, when thousands of calves were pushed to feedlots months before they would normally have been placed. As noted earlier, some of that is still going on as drought conditions continue.
So what does all of this mean for future placement patterns? We think only one of the discussed factors – rainfall/pasture conditions – is transient. And we hope it becomes transient soon! All of the others – higher grain prices, operational economics of feedyards and packers, smaller calf crops, improved cattle performance – are pretty much permanent. Yes, grain prices could drop from their current levels if the weather is favorable in 2013. But feed costs will still be significantly higher than in the pre-biofuels era and the cost advantages of weight gains on pasture, though smaller, will not completely disappear.
About the only factor we see that could stop this trend would be consumers’ balking at larger and larger cuts, thus limiting finished weights and pressuring placement weights. This concern, of course, is nothing new, and the fact is that few cuts are sold in the same size they come from the animal. Processing and merchandising methods that yield properly sized items, even from big cattle, have been used for many years and will continue to be refined.