May Placements Plunge

While USDA’s June cattle on feed report showed placements came in much lower than anticipated, the inventory was the second largest June 1 number since the data series began in 1996.  As of June 1, there were 11.2 million head of cattle on-feed in feedlots with 1,000 head or more.  This was 4 percent more than last year but 3 percent lower than the prior month.

Cattle feeders placed 1.91 million head into feedlots during May, 14 percent below a year ago and 18 percent lower than the prior five-year (2000-2004) average.

On a weight basis, placements of lightweight cattle were slightly above a year ago, while all remaining weight groups were below 2005 levels.  As expected, placements in states suffering from severe dry conditions were significantly lower than a year ago, with the largest decline reported by Texas with placements down 21 percent.  The biggest surprise was the placement decline in Kansas (down 18 percent from 2005).

USDA reported May marketings at 2.17 million head, about 9 percent above last year. However, there was one more slaughter day this year, thus daily average feedlot marketings were actually only 3.7 percent larger.  Compared to the prior five-year average, marketings were down a little over 2 percent.

The USDA Cattle on Feed report indicated year-to-year increases in cattle slaughter for several more months.  But, several factors will influence fed cattle prices this summer and fall.

Importantly, year-to-year increases in U.S. chicken production have moderated significantly from earlier levels.  Still, it is important to remember that typical cash market lows for slaughter steers are set in the summer.