The July Cattle on Feed report and the mid-year Cattle Inventory released last Friday tell the story of continuing drought, writes Darrell Mark, University of Nebraska economist, at www.lmic.info/.

After a drop in May placements, feeders placed 10.7% more cattle in June, mostly lighter weight feeders. Placements of cattle less than 600 lbs. were up 37%, and calves 600-700 lbs. were up 24%. Meanwhile, placements more than 700 lbs. fell 5-6% from 2005.

Mark says the higher placements of lighter cattle suggest drought is driving light stockers off grass early, and early weaning may be taking place. Thus, supplies of feeder cattle may be tighter than expected this fall. He says the trend also points to increased slaughter numbers in 2007's first quarter, which may pressure fed prices.

Mark calls the growing front-end supply of cattle on feed "concerning." Cattle on feed for more than 120 days (3.9 million head), is up 18.2% from last year, the fourth consecutive month of double-digit increases. And, it's translating to increasingly larger dressed weights.

Meanwhile, the Cattle Inventory report estimated the July 1 all-cattle and calf inventory at 105.7 million head, up 1.1% from July 1, 2005. Both the beef-cow and dairy-cow inventory grew only 100,000 head from last year.

Mark believes limited feed supplies and drought are dampening herd expansion, while the number of heifers held for beef cow replacements in 2006 (5 million head) was unchanged from 2005.

That slow growth in beef-cow numbers portends just a 0.3% increase in the 2006 calf crop. At 37.9 million calves, that's less than 400,000 head more than the 2004 calf crop, which was the smallest in history. Thus, he says, fall calf supplies are expected to remain tight, which points to another year of relatively high feeder cattle prices.
-- Joe Roybal