The USDA has released the January Cattle on Feed Report which says on Jan. 1 the number of cattle on feed was 3% higher than a year ago, however traders were expecting a slightly larger number. University of Missouri-Columbia Agricultural Economist Ron Plain says that the big difference was in marketings.
"USDA said marketings were down only 1.9% during December," Plain said. "The trade was expecting a 3% drop in marketing, so those extra marketings pulled down the total number of cattle on feed relative to what traders were expecting."
Plain says that placements were almost exactly what the trade was looking for, down 5.9% compared to a year ago, and that reflects the fact that a lot of cattle were placed in the fall and earlier in 2011 because of short pasture conditions.
There has been the expectation that there will be contraction of the cow herd, but it hasn't shown up yet, although Plain says the report does show some numbers that point to reduction of the herd in the near future.
"Steers on feed were up 1.4% compared to a year ago but the number of heifers on feed were up 5.6%," Plain said. "So a lot more heifers were moved into feedlots in the last part of 2011 than steers; they're headed to slaughter rather than being kept for breeding. It's another indication that the cow herd is likely to be down in 2012 with fewer calves, which is going to continue to tighten the supply of cattle and the supply of beef in grocery stores."
There was a lot of talk last year about producers expanding, but Plain says it is unlikely to occur.
"The economics would argue that we ought to be expanding; we had record cattle prices in 2011 and are expecting more record highs here in 2012," Plain said. "But the feeding problem that a lot of cattlemen have is the lack of pasture. We had an extremely dry year in the Southern Plains; 23% of the beef cows in the United States are located in Texas and Oklahoma and they just had the worst drought on record. So even though the dollar signs indicate we have a lot of cattleman who should be expanding the cow herd, they can't make that happen. Until we get a better grazing situation we're not likely to see a turnaround in the U.S. cattle herd."