US Perspective - 07.02.12
Courtesy of The Maxfield Report
www.themaxfieldreport.com
The USDA’s January cattle inventory survey said there were 90.8 million cattle in the US at the start of 2012. Fewer than the year before and the lowest cattle inventory since 1952. The 2011 calf crop was put at 35.3 million head, down 1.1% from the year before, and is down for the 16th consecutive year, resulting in the smallest calf crop since 1950.
The beef cowherd totalled 29.9 million head at the start of the year, down 3.1% from January 1, 2011. Milk cow numbers were up 0.9%. The number of beef replacement heifers was up 1.4%. Dairy heifers kept for replacements were down 0.9%. The combined total of cows and replacement heifers expected to calve this year implies the 2012 calf crop will be 1.9% smaller than in 2011.
At the start of 2012, the number of steers 500 pounds and over was down 2.0%; the number of 500 pound plus heifers not being held for cow replacements was down 2.2%; and the number of calves weighing less than 500 pounds was down 2.8% from a year earlier. In total, the inventory of feeder cattle was 2.3% smaller than 12 months earlier.
The number of cattle on feed in the US at the start of 2012 was up 0.8% from a year earlier. The monthly cattle on feed survey of large feedlots said their inventory was up 3%. Thus, the number on feed in smaller lots, which are only surveyed every six months, was down 9.5%. The big difference between small (down 9.5%) and large (up 3.0%) feed yards means the monthly cattle on feed numbers do not match well with fed cattle slaughter.
Meanwhile, the beef cutout value was lower last week. On Friday morning, the choice cutout value was $183.12 per hundredweight, down $1.05 from last week. The select carcass cutout was down $1.07 from the previous Friday to $178.14 per hundred pounds of carcass weight. In the meantime, fed cattle prices were higher this week on light volume, as through Thursday, the 5-area average price for slaughter steers sold on a live weight basis was $123.77 per hundredweight, up 77 cents from last week and $18.00 per hundredweight above the same week last year. Steer prices on a dressed basis averaged $200.00 per hundredweight, up $29.92 from a year ago. For the record, there was no dressed price quote a week ago.
Feeder cattle prices across the country this week were mostly steady to $6 higher than last week. The Oklahoma City auction prices were $2 lower to $2 higher.
The look ahead
Packers are attempting to find a balance as they attempt to push down live cattle prices, while stabilizing box beef prices. This is likely to result in the slaughter struggling to exceed 600,000 head again this week as packers are staring at margins that are $100 per head in the red and higher.
In turn, we would not be surprised if packers did not offer this week. If packers should offer, look for offer lists to be thinly populated and asking prices higher. Overall, we expect a relatively quiet week of trading as buyers attempt to adjust to “sticker shock”. However, we are hearing reports of panicked buyers in the market place and we suspect interest from these buyers to will encourage sellers to try to maximize the value of their hides this week.
The slaughter
Monday’s estimated cattle slaughter at 124,000 head is ten thousand head higher than the same day last week, while it is a thousand head lower than the same day last year. Worth noting is that the three-year running average slaughter for this week is 620,000 head; however, considering packers continue to face margins that are in the neighbourhood of $100 per head in the red, we look for a slaughter that will barely exceed 6000,000 head this week and will peg our weekly guess at 605,000 head.
Meanwhile, last week’s cow and bull slaughter at 135,000 head is identical to the week prior, while it is ten thousand head higher than the same week last year. For the year, we have seen 692,000 head slaughtered and this is 14,000 head or 2.065% higher than the pace we set a year ago.
