Feedlot inventory has fudge factor

May 02, 2024

Supply and demand drive cattle prices. The U.S. Department of Agriculture’s National Agricultural Statistics Service compiles a wealth of information regarding cattle supply from surveys of producers. It publishes that in Cattle on Feed reports.

Using a balance-sheet approach ensures that estimates are as accurate as possible. Cattle on feed at the beginning of the month, plus placements, minus fed-cattle marketings and other disappearance should equal cattle on feed at the beginning of the next month.

“Other disappearance” includes death loss, cattle movement from feedlots to pasture and shipments to other feedlots for further feeding. The “Cattle Price Reactions to Cattle on Feed” reports can be large. That makes accounting important for even subtle inventory changes.

Feedlot flexibility complicates counts

During January 2024 other disappearance from U.S. feedlots with a capacity of 1,000 head or more totaled 81,000 head. That was 18,000 head or 29 percent more than January 2023 and the largest since October 2014. February 2024’s other disappearance totaled 56,000 head; that was 3 percent less than February 2023.

The USDA asks survey respondents to only include “steers and heifers being fed a ration of grain, silage, hay and/or protein supplement for the slaughter market that are expected to produce a carcass that will grade select or better” in their on-feed inventories. That hopefully keeps cattle intended to go to pasture from appearing in cattle-on-feed inventories. Those cattle will be included in placements when they go to a finishing feedlot and then on that feedlot’s inventory.

And feedlots backgrounding cattle for sale as feeders, or for further finishing in another feedlot, should not include those cattle in their on-feed inventory. The USDA will include those cattle as placements when they go into a finishing feedlot. Including them as on-feed inventory in the backgrounding lot would overstate market-ready supplies and supplies of cattle soon to be market-ready. If backgrounding cattle were incorrectly included in on-feed inventories, they would not appear as fed-cattle marketings when they were sold as feeders or finished in another feedlot. They would land in the selling or transferring feedlot’s other disappearance. The larger the other disappearance, the more complicated the supply analysis becomes.

One exception to only including cattle intended for slaughter in the on-feed inventory may exist. Producers sometimes pull heifers out of feedlots for breeding. Think of those as two-way heifers; they are available for finishing or breeding. They should be included in on-feed inventories until they go to pasture. Then they will appear in other disappearance. That’s why other disappearance usually peaks in May each year when grass becomes more available.

Feedlots developing heifers and selling them as replacements is not new and is not widespread, but is a business opportunity. That’s especially the case when replacement-heifer values are excellent.

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