The Norman Transcript

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November 14, 2012

Feedlot prospects worrisome for American cattle industry

(Continued)

NORMAN —

Feedlot inventories have represented almost 15 percent of total cattle inventories and 51.4 percent of feeder supplies for the last decade. The record-setting Jan. 1 cattle-on-feed inventory was 14.8 million head in 2008, an increase of 14 percent from the 1970s despite the fact that total cattle inventories decreased 20 percent during the same time period.

Slight decreases in feedlot inventories since 2008 have been more than offset by decreased cattle inventories and feeder supplies.

In 2012, the Jan. 1 feedlot total was 14.1 million head, which represented a record 15.6 percent of total cattle inventories and 54.9 percent of feeder supplies. This means that there are currently 1.8 feeder animals available for every animal in feedlots.

“Obviously, the only possibility for this level of feeder cattle supplies to maintain feedlot inventories is with the very slow turnover rate that comes with feeding ever lighter and younger animals for long periods of time,” Peel said. “Corn prices that average twice the historical level and currently are 3.5 times historical levels make this economically infeasible.”

High corn prices are a strong incentive for more yearling feeding rather than calf feeding. Peel points out that the rebuilding of beef cattle inventories will eventually allow feedlots to respond appropriately to high corn prices by placing heavier cattle and reducing days on feed. Only then will the beef industry be able to respond to high grain prices to its fullest potential. Unfortunately, it will likely take until 2015 or 2016, and possibly later, before any appreciable increase in feeder supplies can occur. The manner of feedlot business that carried the sector through the herd declines of the 1980s through 2006 is not feasible.

Observers contend that feedlots are faced with the dilemma of feeding economically infeasible animals, not having enough animals to feed or both.

“The already high pressure resulting from chronic feedlot excess capacity will increase sharply in 2013 and 2014,” Peel said. “The recent announcement of the closure of a sizable feedlot in Kansas will surely not be the last such news in the coming months.”

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