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The Numbers are in: Part 2

Feb 10, 2012

-By Derrell S. Peel, Oklahoma State University Extension Livestock Marketing Specialist

A previous article reviewed how the latest USDA Cattle report
confirmed the impact of the drought in 2011 with continued
liquidation of cattle numbers and dramatic regional shifts in cattle
numbers. This article will look at what the report indicates about
prospects for 2012.

One important issue is the implication for feeder cattle supply in
2012. The January 1 estimate of feeder cattle outside of feedlots is
25.85 million head, down 1.06 million head (3.9 percent) from one
year ago. Remember that the feeder supply last year was down 2.9
percent from 2010. In total, the U.S. feeder cattle supply has
dropped 1.85 million head or 6.7 percent in the past two years.
However, the January 1, 2012 Cattle on Feed inventory was 14.12
million head, up nearly one percent from the previous year.
Moreover, the feedlot inventory on January 1, 2011 was up 2.7
percent from 2010. The point is that feedlots have done a
remarkable job of maintaining feedlot inventories but only at the
expense of future feeder cattle supplies. It seems less and less
likely that this can continue.One measure of this intensity of feeder cattle use is to look at the
ratio of feedlot inventory to the feeder cattle supply.

For January 1, 2012, this ratio or percentage was 54.85 percent. This is a
record high for this statistic. This value means that for every
animal in feedlots on January 1, there were only 1.83 feeder
animals outside of feedlots to replace them. This statistic has
increased since the mid-1970s. In 1975, the value was 17.2
percent meaning that there were 5.8 feeder animals outside feedlots
for every one already placed. As recently as the mid-1990s this
value was about 38 percent meaning that there were 2.6 animals
available for every animal in feedlots. The industry has continued
to get more intensive with the use of feeder animals but it is
unlikely that this percentage can continue to increase.

Another measure of the intensity of feeder cattle use is to look at
the estimated feeder supply as a percent of the previous year’s calf
crop. This provides a measure of how many animals are being
carried over from one year to the next. The value for 2012 was
72.9 percent, the second lowest value for this statistic. It indicates
that more calves were “used” quickly relative to the size of the calf
crop. This certainly reflects the drought induced early placements
that occurred in the summer and fall of 2011. This statistic
averaged 75.8 percent the past five years and was as high as 82
percent at the last cyclical peak in cattle numbers in 1995. The
point is that there were less feeder cattle brought into 2012 and that
less will be available this year for placement in feedlots.

These two measures both indicate that the long standing tendency
of the industry to pull cattle ahead, i.e use them more intensively,
accelerated significantly the past two years and it is unlikely that it
can continue for another year. I admit that I have been amazed at
the industry’s ability to find feeder cattle when it seems there are
no more. However, that ability last year was based on very
unusual behavior such as placing Mexican cattle directly in feedlots at light

weightsand was abetted by the drought forced early placement of calves.

I don’t think the industry has many
more tricks up their sleeve and I expect to see feedlot inventories
contract as we move through the next few months. Just how much
feedlot inventories will decrease will depend, in part, on how much
heifer retention occurs in 2012 and that will be the subject of the
next article.

The Numbers are In: Part 1

Source: OSU