September 1st Cattle on Feed Report Recap

The latest USDA Cattle on Feed report released Friday showed larger supplies of cattle placed into feedlots than most analysts expected prior to the report. The report showed a three percent increase in the number of cattle placed into feedlots during the month of August as compared to the same period last year. Average expectations prior to the report were that placements would be slightly lower than last year. This is a bearish report that is likely to put downward pressure on the markets on Monday.

The larger placement numbers combined with a generally anticipated six percent year-over-year increase in marketings leave the total number of cattle on feed at four percent larger than on September 1, 2016. As shown in the chart, total cattle on feed have been larger than 2016 months for all of 2017. This gap has only widened in recent months. August is usually near the lowest inventory month of the year. The total cattle on feed number is expected to increase over the next few months due mostly to seasonal factors. However, the impact of larger calf supplies will likely be obvious as well.

It is important to note that the pre-report expectations were not driven by estimates of declined placements. Rather, the number of cattle placed into feedlots a year ago was relatively large. Thus, a typical August in the larger supplies of 2017 was expected to be on par with the large 2016 number. The fact that placements were 3 percent above the large September 1, 2016 number sets the stage for an interesting Fall. A few potential reasons for the increased placements include the drought in the Northern Plains, profitable closeouts on fed cattle sold from January through July, and potentially more heifers placed than a year ago.

Looking ahead, with the larger U.S. calf crop to be weaned this fall and more heifers placed on-feed than a year earlier, year-over-year increases in animals placed on-feed should be anticipated in most months during the balance of this calendar year and throughout 2018.

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