Abundant pasture growth, coupled with spiking corn prices, may be slowing the movement of cattle from open fields onto US feedlots.
Cattle placements onto feedlots during June were down 2% from a year earlier, pushing monthly placements down to the lowest level so far this year, according to the USDA’s latest Cattle on Feed and Cattle reports. The resultant greater population of cattle grazing on pasture could lead to a jump in beef supplies in coming months.
There are already ample cattle supplies. With cattle futures prices lingering at the lower end of their two-year range, the number of cattle currently on feed hit a record high for July at 13.6 million head. Total herd size in the US stood at 103 million head as of July 1, about equal to the same month last year, and USDA PS&D projects 2019 will set a new beef production record at 12.44 million tonnes.
The left chart shows that the number of cattle on feed set record highs for July (line with markers, compared with previous years), suggesting a value chain that is already well supplied. At right, the number of new cattle placed on feed (line with markers, compared with previous years) during June was 2% lower than in the same period last year. Better grazing prospects help to account for this decline.
This season’s historic rains are driving an economic wedge between pasturing cattle and feeding corn, and its effect may be amplified by a supply pipeline that is already quite full. Flooded acreage and delayed planting in many Midwestern states, including Illinois and Iowa, caused corn prices to rally, raising the cost of the grain for feedlots. Meanwhile, abundant rain, albeit less torrential, in key livestock centers such as Texas and Kansas, has encouraged longer pasturing of cattle. Unlike vulnerable row crops, pasture is relatively resilient to heavy rains and the result is often a boost in productivity.
The difference in how pasture and corn fields handle excessive moisture can be seen in the condition ratings. While crop conditions are some of the worst in years, pasture and range conditions are the exact opposite. Corn rated good to excellent by USDA NASS is a mere 58% as of last Sunday, well below last year’s 77%. In contrast, 68% of pasture and range was rated good to excellent, the highest rating for the week since record-keeping began in 1995.
While damage to corn and soybeans received the bulk of the attention amid the onslaught of spring flooding, the US livestock industry matches that of crops in market value, each worth around $200 billion per year. Cattle constitutes about 35% of livestock’s value, and cattle producers’ largest variable cost is feed. For this reason, the widespread rains continue to be a significant factor in shaping the cattle supply chain, discouraging corn-feed use and encouraging pasture use. The result is to build cattle supplies upstream of feedlots and to set the stage for higher sales weights, beef-price pressure, and lower corn-feed use in the months ahead.
In the chart above, the green line shows that the percentage of soils exhibiting surplus moisture in the big corn-growing states of Iowa and Illinois was extremely high this spring (the percentages are added together for the two states). The line with markers represents 2019, and is compared with previous years. The blue line shows the same measure for Texas and Kansas, two of the biggest livestock-raising states. Soil moisture for these states was very high by historical standards, but well below that of Iowa and Illinois. Such excessive moisture is damaging to crops, but can be favorable for pasture land.