Post by Glenn on Feb 13, 2012 9:35:47 GMT -6
FEBRUARY 12, 2011
MARKET REPORT AND ANALYSIS
USDA is coming under increasing criticism for the accuracy and reliability of the cattle numbers. Third party data collectors and analysts are picking apart USDA methodology and data collection protocols and pointing to obvious flaws in the reporting [see this week's editorial]. At issue is the number of cattle on feed and more particularly the state of current offerings. The decline in packer slaughter currently is either a result of poor demand or alternatively fewer cattle. Based on USDA cattle on feed numbers, the current offerings should be 6% over last year. Few believe these kind of numbers are on offer for sale.
Regional differences surfaced on cash trades late last week. Texas gained a dollar while Kansas held steady and in the north prices fell .50 to $1. Texas traded most cattle at $124 while Kansas, Nebraska and Colorado mostly sold cattle at $123. In the beef prices were mainly at $197-198.
Box prices flattened at week's end. Short bought retailers have participated and volumes have improved. Box prices were up generally over a dollar. The choice cut out was steady at $186 and select higher at $182. The spread was quoted at $4 -- lowest point of the year.
Recent rains across Texas, New Mexico, Oklahoma and Kansas may set the stage for a squeeze on replacement cattle. Restocking drought stricken pastures will require cattle. Record breaking prices has brought the cattle to market in January while threatening supplies down the road. Prices for lighter cattle were once again several dollars higher pushing many 400# steers well to $200-225. A 750# feeder steer was selling for $155 on the south plains.
Corn prices weakened even as the government reduced crop size in South America because of dry weather. More recent rains have improved conditions. Traders will start giving more attention to this year's allocation of acres to the new corn crop. The basis in Guymon Oklahoma is $.80 over December contract. Corn is now pricing into most rations at $12.75 cwt..
STRICTLY BY THE NUMBERS
USDA collects data for the monthly Cattle on Feed reports from 2000 feedyards. These feedyards are from 16 states and assumed to represent 98% of the cattle on feed in feedyards in the country. The collection process is a combination of telephone calls and mailed out and mailed back surveys. A few years ago an improvement was added to the collection -- telephone survey results were entered into a web page and attendant data base as the questions were answered.
The largest problems are assumptions appropriate for the report 50 years ago that have failed to be updated as the industry has changed. Foremost among these assumptions is the model that has 20% of the cattle on feed in this country originating in feedlots under 1000 head. USDA statisticians assume the modeled behavior for purchasing and marketing for these feedlots to be the same as the above 1000 head feedlots.
The flaw is the USDA assumption that under 1000 head feedyards represent 20% of cattle on feed. Independent surveys accompanied by USDA bi-annual cattle inventory show that percent to have dropped. While over 1000 head feedyards have expanded, the under 1000 head category is in decline. The result of the flaw is an overestimation of the cattle on feed numbers. Assuming 20% of the cattle incorrectly assumed to be in feedlots under 1000 head, overestimates both marketings and placements. USDA is assuming similar placement behavior for under 1000 head feedyards as over 1000 head feedyards and projecting that number to 20% of the cattle on feed.
A concrete example is the marketing figures reported with each monthly cattle on feed report. USDA surveys feedyards and estimates the marketing numbers for the month. This number can be compared to the daily reports from the beef processors reporting the number of steers and heifers slaughtered. USDA Cattle on Feed marketings are running several percentage points above the actual slaughter of fed steers and heifers as reported by the beef plants.
It appears to old adage of "the big get bigger" is a truism in the world of cattle feeding. The day of the farmer feeder with less than 1000 head on farm is disappearing. Competition and efficiencies of scale make it almost impossible for smaller feeding operations to compete. This reality needs to be recognized and adjust for future USDA reports. Probably a more efficient data collection would be for the permitting entities in each state to call for mandatory web based reporting each month of placements, marketings, death loss and ending inventory.
MARKET REPORT AND ANALYSIS
USDA is coming under increasing criticism for the accuracy and reliability of the cattle numbers. Third party data collectors and analysts are picking apart USDA methodology and data collection protocols and pointing to obvious flaws in the reporting [see this week's editorial]. At issue is the number of cattle on feed and more particularly the state of current offerings. The decline in packer slaughter currently is either a result of poor demand or alternatively fewer cattle. Based on USDA cattle on feed numbers, the current offerings should be 6% over last year. Few believe these kind of numbers are on offer for sale.
Regional differences surfaced on cash trades late last week. Texas gained a dollar while Kansas held steady and in the north prices fell .50 to $1. Texas traded most cattle at $124 while Kansas, Nebraska and Colorado mostly sold cattle at $123. In the beef prices were mainly at $197-198.
Box prices flattened at week's end. Short bought retailers have participated and volumes have improved. Box prices were up generally over a dollar. The choice cut out was steady at $186 and select higher at $182. The spread was quoted at $4 -- lowest point of the year.
Recent rains across Texas, New Mexico, Oklahoma and Kansas may set the stage for a squeeze on replacement cattle. Restocking drought stricken pastures will require cattle. Record breaking prices has brought the cattle to market in January while threatening supplies down the road. Prices for lighter cattle were once again several dollars higher pushing many 400# steers well to $200-225. A 750# feeder steer was selling for $155 on the south plains.
Corn prices weakened even as the government reduced crop size in South America because of dry weather. More recent rains have improved conditions. Traders will start giving more attention to this year's allocation of acres to the new corn crop. The basis in Guymon Oklahoma is $.80 over December contract. Corn is now pricing into most rations at $12.75 cwt..
STRICTLY BY THE NUMBERS
USDA collects data for the monthly Cattle on Feed reports from 2000 feedyards. These feedyards are from 16 states and assumed to represent 98% of the cattle on feed in feedyards in the country. The collection process is a combination of telephone calls and mailed out and mailed back surveys. A few years ago an improvement was added to the collection -- telephone survey results were entered into a web page and attendant data base as the questions were answered.
The largest problems are assumptions appropriate for the report 50 years ago that have failed to be updated as the industry has changed. Foremost among these assumptions is the model that has 20% of the cattle on feed in this country originating in feedlots under 1000 head. USDA statisticians assume the modeled behavior for purchasing and marketing for these feedlots to be the same as the above 1000 head feedlots.
The flaw is the USDA assumption that under 1000 head feedyards represent 20% of cattle on feed. Independent surveys accompanied by USDA bi-annual cattle inventory show that percent to have dropped. While over 1000 head feedyards have expanded, the under 1000 head category is in decline. The result of the flaw is an overestimation of the cattle on feed numbers. Assuming 20% of the cattle incorrectly assumed to be in feedlots under 1000 head, overestimates both marketings and placements. USDA is assuming similar placement behavior for under 1000 head feedyards as over 1000 head feedyards and projecting that number to 20% of the cattle on feed.
A concrete example is the marketing figures reported with each monthly cattle on feed report. USDA surveys feedyards and estimates the marketing numbers for the month. This number can be compared to the daily reports from the beef processors reporting the number of steers and heifers slaughtered. USDA Cattle on Feed marketings are running several percentage points above the actual slaughter of fed steers and heifers as reported by the beef plants.
It appears to old adage of "the big get bigger" is a truism in the world of cattle feeding. The day of the farmer feeder with less than 1000 head on farm is disappearing. Competition and efficiencies of scale make it almost impossible for smaller feeding operations to compete. This reality needs to be recognized and adjust for future USDA reports. Probably a more efficient data collection would be for the permitting entities in each state to call for mandatory web based reporting each month of placements, marketings, death loss and ending inventory.