The chart above shows cattle are staying on feed longer than in the past.
The chart above shows cattle are staying on feed longer than in the past.

From USDA Livestock, Dairy, and Poultry Outlook Report

The forecast for 2018 beef production was lowered by 30 million pounds to 26.9 billion pounds. The mild revision is based on numbers at the closeout of the third quarter, along with fourth-quarter expectations of slightly fewer steers and heifers to be slaughtered and fewer bulls in the slaughter mix. However, despite an adjustment to lower the steer and heifer slaughter in the fourth quarter and an extra weekday available in the quarter to slaughter cattle, the steer and heifer slaughter rate per weekday in the fourth quarter is expected to remain above levels for the same period last year.

The 2019 beef production forecast was lowered by 100 million pounds to 27.8 billion pounds. The adjustment reflects fewer-than-expected cattle placed in feedlots in third-quarter 2018, thereby reducing the expected number of fed cattle marketed and slaughtered in early 2019. According to the National Agricultural Statistics Service (NASS) Cattle on Feed report in September there were 4.7 percent fewer cattle placed in feedlots, but 3.6 percent fewer cattle marketed than last year. As a result, there remained 5.4 percent more cattle on feed than a year ago, which supports the expectation of strong marketings in first-half 2019.

Cattle Available 

Outside Feedlots Fractionally Higher

The ERS webpage Livestock & Meat Domestic Data has a table titled “Feeder Cattle Supplies Outside Feedlots.” The table estimates the number of cattle available to place into feedlots on October 1 at 30.1 million head, only 0.06 percent larger than this time last year. This suggests that about the same number of cattle are available to be placed into feedlots as were placed a year ago. Winter forage seems to be in better condition than last year, which could provide a home for these calves to stock over the winter. While this may be a positive sign for feeder calf prices in the coming months, limiting factors are the record numbers of cattle already on feed3 at the beginning of October and expectations of higher feed prices. In addition, cattle are staying on feed longer than last year (see chart). The higher number of cattle already in feedlots may limit the competition from feedlots for ownership of these calves, and higher feed prices may limit feedlot management’s willingness to pay higher prices for calves.

During October, Oklahoma City National Stockyards reported the highest monthly average price in 2018 for 750- to 800-pound feeder steers. Typically, feeder calf prices are higher in the second half of the year, but they tend to reach their peak in midsummer. Since weekly prices peaked on October 1 at $159.71 per hundredweight (cwt), they have fallen more than 9 percent to $145.29 per cwt on November 12. The forecast for fourth-quarter 2018 feeder steer prices is unchanged from last month at $151-$155/cwt. However, the 2019 annual price forecast was lowered to $140-$151/cwt on slightly higher anticipated feed costs and continued large feedlot numbers.

Beef Demand 

Resilient in 

Second-Half of  2018

Since early August, wholesale choice beef cutout prices have avoided the seasonal third-quarter slump of the past 2 years and have stayed well above year-earlier levels. In fact, the weekly beef cutout price for the week ending November 9 has climbed to within June price levels despite higher year-over-year beef production for third-quarter 2018 and higher expected production in fourth-quarter 2018.

As depicted in the chart below, fed steer prices have also avoided a seasonal dip in the third quarter; this year’s seasonal dip was almost nonexistent and prices have remained fairly flat since June, staying in a range of $109.90/cwt to 112.20/cwt with an average of $110.91/cwt. As cattle on feed numbers built up in the first half of the year, the higher year-over-year percent of cattle on feed over 150 days likely reflected feedlot operations’ resistance to accepting low prices in the face of poor returns. Although the percentage of cattle on feed over 150 days has declined seasonally, it remains within historic norms.