The latest cattle on feed reports shows the largest September 1 inventory number on record, with some 11 million head on feed. The good news is that the industry remains current as August marketings were up 2%. Also, the number of cattle on feed for 120 days or longer, which is looked at as an indicator of front end supplies, actually declined in August.
Front end supplies are larger than the last couple of years, and weights continue to be heavy. Weights will continue to be heavy until there is $4 corn, significant premiums for lighter carcasses or sharp discounts in the futures market relative to cash.
But, the industry has emerged through the summer bulge in very good shape. Placements continue to be the factor driving cattle on feed numbers higher. Like other recent months, placements were up 15% compared to a year ago. Yet, these increased placement numbers continue to come from placing lighter cattle earlier.
The available supply of feeder cattle is not larger than anticipate, the numbers are just coming into the feedyards at a much quicker pace than in the past. This probably means that the seasonal dip in calf prices at the heart of the calf run will be less pronounced than in the past.
The real question seems to be how this shift in placement pattern will shift or change the timing of when these cattle come out. It will be interesting to note if these lighter placement weights translate into lower fed weights and in fact reduce tonnage. In the past, the mantra "heavy in equals heavy out," has usually held true. One would expect that the converse is also true "light in equals light out."
-- Troy Marshall