However, it is important to note that while producers continue to place more cattle on feed, the growth is driven by placement of very light cattle, feeders less than 600 pounds (see chart).

This implies that feedlots will need more time than usual to get these animals to market weight and despite the larger inventory, the number of market ready cattle is likely at or below year ago levels. Below are some of the highlights from this report:

Total cattle inventory on 1 December was 12.081 million head, four per cent larger than a year ago and the largest feedlot inventory since February 2006. Pre-report estimates were looking for a 3.7 per cent increase in feedlot inventories.

Prior to the report, analysts were split as to the pace of feedlot placements in November. On average analyst expected placements to be at the same level as a year ago after several months of higher feedlot placements. However, the latest USDA data shows feedlots placed 2.039 million head of cattle on feed during November, 4.1 per cent more than a year ago.

The survey indicated that placements of calves under 600 pounds rose 21 per cent compared to a year ago or 130,000 head while placements of cattle of cattle 600 pounds or heavier declined 3.7 per cent from a year ago. The higher placements in November were likely driven by rising cattle prices out front even as corn futures deteriorated.

April 2012 live cattle traded in a range of $126-$128 for much of November while corn prices dropped about 60 cents for the month, or nine per cent. This allowed feedlots to bid aggressively on cattle although, as mentioned earlier, they are having to dig deeper in the available stock and place ever lighter animals on feed.

Cattle marketings in November were estimated at 1.770 million head, 0.2 per cent lower than a year ago, higher than pre-report estimates which were looking for a 1.5 per cent decline.

We noted in our report on Wednesday, there continues to be a discrepancy between the slaughter data reported in the USDA monthly statistics and the marketing numbers from the feedlot survey. For the period Jan - Oct, marketings out of feedlots are up three per cent from a year ago while steer/heifer slaughter is down 0.4 per cent.

According to Jim Robb at the Livestock Marketing Center (Lmic.info), the reason for this discrepancy is due to structural changes in the industry. USDA only surveys feedlots that have more than 1000 head of cattle on feed on first of each month. But, LMIC analysts note, as smaller feedlots have either exited the business (vs. year ago) or become larger in order to compete more effectively, this has increased the sample size and skewed the year over year comparisons.

They also note that with smaller imports from Canada, the overall slaughter will show a larger decline than the domestic feedlot marketings.

Bottom line: Some of the increases in feedlot numbers (both placements and marketings) may be driven by the fact that the survey is covering a larger portion of the industry rather than more head on the ground.

Further Reading