A sharp decline in cattle placements highlighted Thursday’s USDA Cattle on Feed report, but tight supplies of market-ready cattle remain the bigger story for the industry, according to one market analyst.
David Erickson of Ag Optimus said placements fell significantly from the previous month, dropping from 105% of a year ago in May to just over 90% in the latest report.
“There’s two different ways you can look at a big placement. Number one is that there’s a lot of cattle that were placed. Second is, we know where they’re placed and you can only place them once.”
The USDA reported cattle placements at approximately 90% of year-ago levels, while the on-feed inventory came in at 101.8%, slightly below the average trade estimate of 102.5%.
Erickson said larger placement numbers seen in previous reports likely reflected drought-related movement of cattle into feedlots, particularly in parts of the Northern Plains.
South Dakota and Idaho posted some of the largest increases in cattle inventories by state, a trend Erickson attributed to limited forage availability.
“I think a lot of that probably has to do with the drought and the fact that a lot of these cattle that were probably going to go on grass ended up there wasn’t the grass there for them, so they had to go to a feed yard and find a different home,” he said.
Despite on-feed inventories remaining above year-ago levels, cattle prices continue to trade well above last year’s values, reflecting historically tight supplies.
Erickson noted that live cattle and feeder cattle prices are substantially higher than they were at the same time a year ago, even with more cattle currently on feed.
“The supplies are extremely tight and we’ve gotten up to these pretty lofty levels.”
He pointed to reduced slaughter numbers as further evidence of limited supplies. Federally inspected cattle slaughter totaled 317,000 head through the week, compared to 332,000 head during the same period a year ago.
The lower marketing percentage in the report was not necessarily the result of producers holding cattle back, Erickson said, but rather a lack of cattle ready for market.
“It’s not because people aren’t selling, it’s because they’re just not available.”
The latest report arrives after a strong week in the futures market, with June live cattle futures gaining $4.25 and feeder cattle futures adding nearly $8 per hundredweight before trading paused for the Juneteenth holiday. Erickson said traders will be watching closely to see how feeder cattle futures react when markets reopen Monday.