The most recent U.S. Department of Agriculture’s “Cattle on Feed” report showed the feedlot inventory as of June 1 was 11.699 million head, almost unchanged from 11.671 million head on June 1, 2020. May marketings were 1.87 million head, up 23% year over year. Feedlot placements in May were 1.911 million head, down 7% from the same period last year.
Derrell Peel, Oklahoma State University Extension livestock marketing specialist, said the big question is whether the feedlot situation is improving to a point where the fed cattle market can emerge from the capacity cap that has limited the market in 2021. While the situation is improving, he said the industry is not quite there yet.
Peel explained that the February 1 on-feed total was the highest of any month since February 2006 and reflected the buildup of feedlot inventories carried over from pandemic disruptions last year. From February to June, feedlot inventories have dropped by 3.4%, the largest decrease in that period since 2012. In fact, Peel said the average change in feedlot inventories from February to June in the five years from 2016-2020 has only been a slight increase of 0.3%.
Figure 1 shows the twelve-month moving average of feedlot inventories. Peel said this provides a longer-term view of the feedlot situation by removing seasonal variation and allowing month-to-month comparisons of average feedlot inventories for the previous 12 months.
Since March, the twelve-month moving average has been at record levels and increasing each month. The most recent value for June 2021 is another record level.
“This shows that the feedlot industry has not yet turned the corner to begin reducing average feedlot inventories. I expect this will happen in the next month or two,” said Peel. “The decline in monthly feedlot inventories since February is encouraging and represents progress in moving to cyclically smaller feedlot production.”
The current fed cattle market will show improvement faster than the moving average in Figure 1, which Peel said appears to be happening. Cash fed cattle prices last week averaged $122/cwt., the highest level in eight weeks.
“Barring some new disruption, feedlot inventories should drop below 2020 (and 2019) levels in the next month or two and remain there going forward. However, the ongoing drought could represent such a disruption if dry conditions force feeder cattle into feedlots sooner than usual. Drought could slow down the process of tightening beef supplies in 2021 but increased cowherd liquidation would lead to even smaller supplies in the coming years.”