A great TV or book series always strings you along. Their strategy is to keep you captivated by providing just enough clues along the way to hold your interest, but never enough to ensure confidence about the final outcome. The result is you end up hooked until the very end.

So it goes with this year’s cattle-on-feed reports. Important signals about the business have percolated during the past 6-12 months, but they’ve come intermittently, along with other noise and subplots in the beef complex. Last month’s report, though, provided some pertinent indicators around the collective decision-making throughout the supply chain.

The first aspect revolves around the cow-calf sector. October’s report also includes a quarterly assessment of the inventory’s composition. Figure 1 reflects the relative proportion of heifers on feed over time. The data reflect feedlot heifer numbers drifting lower and, subsequently, the intention to rebuild the cowherd. However, that interpretation needs some broader context.

heifers as proportion of total on feed

Sure, there’s a better appetite to keep back some females, but the change is very incremental, which leaves the overall trend relatively flat. In other words, the commercial sector is treading very carefully with any plans for expansion. This reluctance exists for many reasons, including volatile feed prices, surging land values, weather challenges, demographics, and a general anxiety about duration risk associated with heifer investment.

The second story surrounds feedyard trading strategies. September placements were down sharply and established a new low in the series for the month. That comes on the heels of last month’s sluggish pace (second-slowest August on record). None of that’s really surprising, given costly replacements, burdensome feed prices and heightened risk within the current operating environment. Overall, placements are 6% behind last year’s pace through September.

That brings us around to the other side of the balance sheet – marketings. September’s shipments were disappointing (though somewhat muted by 2012 having two fewer marketing days in September vs. 2011). Nonetheless, the discussion returns us to May’s column detailing the work ahead between April and September. Most notably, weekly shipments needed to average about 465,000 head to remain current. But that didn’t happen, as the pace was closer to about 444,000 head.

 Joint consideration of placements and marketings reflect an overall theme of lagging throughput (Figure 2). This year’s collective pace is second only to 2009 (then driven by the financial crisis and a struggling market). Feedyard managers are carefully managing the swap and are much more reserved about inventory turnover.

cumulative cattle placements through September