Last week’s Cattle on Feed (COF) report came with no real surprises as the market witnessed another detailing of record on-feed numbers and huge placements. However, one fact that we may overlook when diving into the intricate numbers of the COF report is: What are the numbers outside of the feedlots? Since last winter, nearly every single COF report has shared greater placements as crippling drought conditions are driving cattle - that would have historically been grazing grass fields or wheat pastures - into feedlots.
If cattlemen are not careful, they'll become complacent and won't be ready when the market's tide turns. In a volatile marketplace, it's dangerous to be reactionary and it's equally as dangerous to become complacent. Right now, large placements and record numbers of cattle on feed don't bode well for the sellers. This glut of cattle will have to be worked through this summer, and with inflation pinching American's spending dollars, live cattle prices are expected to become significantly cheaper in the months ahead. Once the market has worked through the hefty on-feed numbers, cow-calf producers and feedlots will have a splendid opportunity as limited supplies of feeder cattle favor their selling position.
Obvious concerns of rising input costs and a wavering economy have cattlemen of all sorts holding their breath, but export demand has continued to be stellar, and given how drastically beef cows have been liquidated, the drop in production, via marketable calves to sell, is going to be felt by all.
In a month, the nation's largest video auctions will host some of their early summertime sales and we'll begin to see what initial feeder cattle prices demand in 2022. While working through the summer months and looking for a profitable time to market this year's calves, cattlemen need to have a couple strategies in mind that their operation could utilize later this year. There are a lot of unknows that today's market must manage: the 2022 grain crop, the war in Ukraine, drought, hay prices and consumer demand. But, even with these challenging factors, the severe culling of the nation's beef herd will influence prices this upcoming fall and well into 2023.
Editor’s Take:
Good news – bad news. Cattle numbers in feedlots are growing – cattle in pastures are shrinking. This may not sound all that alarming, but as the article points out, it leads to an imbalance of supply and demand. It appears that the market can work through what is being presented as a short-term phenomenon, but that will depend on how fast the oversupply of cattle on feed can work its way through the system. Nevertheless, it appears that cattle producers will find their way back to greater profitability before the year ends. Be prepared when they are ready to purchase by letting them know today that you have their backs and will be there with trucks and AgPack.
