Livestock Market: Feeder Backlog Will Have Major Ramifications – DTN

Cattle feed lot. Photo: K-State Research and Extension - Creative Commons

There’s been a lot of talk in the last couple months about the backlog of cattle, the increase in carcass weights and the surplus of supply that the industry is going to have to absorb. But until you can wrap your head around just how much extra product is hitting the retail sector, it’s hard to understand the ramifications of this extra supply.

Feeding cattle are like a drug: Once cattlemen get hooked on seeing strong daily gains, it almost becomes an addiction that most can’t fathom quitting, regardless of the expense. Then it’s a lifestyle, it’s a legacy, it’s American beef.

In what feels like a long road trip to see what hell is really like, feeders endured almost all they could take this spring with COVID-19. Enduring eight weeks of minimal kills, having continued fear of whether plants will have to shut down again and managing the looming concern of when and how feeders are going to be able to liquidate their inventory is not for the weak-hearted.

With nowhere to send their fat cattle to, feeders were left with no option but to the feed the cattle they have, coast them on a maintaining ration and hope and pray that a packer calls soon.

In the hysteria of packing plants being shut down and far fewer cattle being placed in feedlots this spring, the typical cattle marketing calendar has been completely altered. Not only are more cattle going to be hitting the market this fall, but the number of cattle on feed (COF) rolling into the 2021 calendar year is going to be far greater that years past.

To jog your memory, March placements totaled 1.56 million head, down 23% from 2019 and was the lowest placement figure for March that the COF report has ever seen since the report began back in 1996.

April’s COF placement numbers were nearly just as depressing, totaling 1.43 million head, down 22% from 2019, and was the second lowest the report has seen since the series began in 1996.

Those cattle that would have historically been placed in that time frame didn’t just disappear. Some producers kept them on feed at their own operation and some feeders went to wheat pastures to buy the market some time to let the chaos of COVID-19 pass.

Nevertheless, those cattle will be circulating the market at one point or another, but most certainly at a different calendar time than most assumed.

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While cattlemen were pacing the floors of their homes, trying to decide if the feedlots were where their 600- to 800-pound feeders needed to land, feedlots that had fat cattle lining the bunks were — and continue to be — dealing with a completely different war.

As you can see from graphic accompanying this column, both live and dressed weights are considerably higher than a year ago. To no fault of the feedlots, feedlot managers were left with no other choice but to continue to feed the fat cattle they had scheduled to hit the market when COVID-19 shut plants down for nearly eight weeks.

In the cattle industry, heavier carcass weights are a burdensome beast to wrestle with because the implication isn’t short-lived, and in the case of 2020, this problem isn’t one that the industry is going to be able to soon forget.

When comparing 2019 and 2020 cattle weights, you can see cattlemen are up against another battle. With beef demand seasonally slow, packers haven’t been overly ambitious to blow past year-ago kill levels. In order to shore up the surplus of cattle in the backlog, the industry needs packers to run at speeds never seen before.

With extra tonnage from heavier weights, the backed-up supply becomes two-fold — not only is there seasonally more cattle to slaughter than years past, but those cattle are packing significantly heavier weights, which greatly affects the marketplace.

Dressed Carcass Weights Live Carcass Weights
January 5 lbs. heavier January 9 lbs. heavier
February 8 lbs. heavier February 18 lbs. heavier
March 24 lbs. heavier March 29 lbs. heavier
April 18 lbs. heavier April 17 lbs. heavier
May 16 lbs. heavier May 43 lbs. heavier
June 38 lbs. heavier June 56 lbs. heavier
July 27 lbs. heavier July 40 lbs. heavier

Over the last couple weeks slaughter, daily slaughter has bounced anywhere from 115,000 head to 120,000 head per day. When you consider 115,000 to 120,000 head of cattle are being processed a day — and those animals are 5 to 38 pounds heavier than a year ago for live weights or 9 to 56 pounds heavier for dressed weights — you quickly see how the increase in weights is astronomical.

If packers processed 115,000 head per day, and those cattle were on average 27 pounds heavier in July (for dressed weights) than a year ago (115,000 head x 27 pounds x one day), that’s a staggering 3,105,000 pounds of extra tonnage hitting the marketplace than compared to a year ago on just one day.

At this point, it’s bewildering to think of the backlog. Not only do we have a surplus of cattle to kill, but those cattle are packing an immense amount of extra tonnage that packers must not only process, but also sell.

As you can see, this problem of backlogged cattle becomes extremely burdensome because it affects today’s market, but also will continue to alter and change the cattle cycle as we know it until the cattle are successfully processed through.

Until then, the cattle industry that we have come to know and love is subject to severe volatility.

ShayLe Stewart can be reached at shayLe.stewart@dtn.com

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