Feedlot placements of cattle declined sharply in October, down 12.5% from the previous year, reflecting high feed prices. The number of cattle on feed as of November 1st was down 5.3% from the previous year. Despite fewer cattle being slaughtered, beef production has held steady due to increased carcass weights. However, if carcass weight gains slow, it could pose a risk to the beef market over the winter months. The EPA denied a request to waive the ethanol mandate, disappointing livestock producers who had hoped it would ease pressure on corn supplies.

1. Vol. 10, No. 224 / November 19, 2012
Market Comments 000 barrels
per day Weekly Ethanol Production, 000 barrels/day, EIA
1000
Livestock and poultry producers, meat packers and food
retailers were holding out some hope that EPA might consider wav- 950
ing, lowering, or modifying the ethanol mandate until corn supplies 2011
recovered next harvest. Those hopes were dashed on Friday as the 900
request was denied since, according to the EPA news release,
“waiving the RFS mandate would have minimal impact on 850
ethanol demand.” At this point, livestock and poultry producers
can do little but hope that energy markets remain depressed 800
enough to limit ethanol demand for corn until next harvest. It is 2012
not a comfortable place to be. So far, ethanol production has aver- 750
aged about 8.5% below year ago levels since September and it is
currently running about 10% below year ago levels. In part this
700
reflects the impact of high grain prices but even more so it is a re-
sult of slowing gasoline demand (and hence lower need for ethanol JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
blending), the use of ethanol credits and lower overall crude oil
prices. USDA currently projects ethanol use for the 2012-13 mar- U.S. ALL CATTLE ON FEED: 1,000+ CAPACITY FEEDLOTS
keting year to decline some 10% from a year ago. If current condi-
tions persist, that projection may be achievable. However, if crude
Number, Thousand Head Current Year as % of Year Prior
oil prices move sharply higher (say because of a conflict in the Mid-
dle East, or improving global demand), then ethanol output would
2010 2011 2012 Actual Estimates Difference
likely follow crude prices higher. What the ethanol mandate has
done is inextricably tie grain, livestock and energy markets. The
problem is that while ethanol producers can quickly cut off produc- Placed on Feed During Oct 2,505 2,492 2,180 87.5 87.3 0.2
tion and then start again in a week, the cattle and hogs liquidated
today will take months and years to rebuild. Moreover, the farms
that are forced to sell may not be able to sustain the economic hit Fed Cattle Marketed Oct 1,734 1,787 1,837 102.8 102.6 0.2
and eventually go out of business. The final result is a US meat
industry that is substantially smaller, meat prices that are sub- On Feed November 1 11,497 11,889 11,254 94.7 94.6 0.1
stantially higher and US producers that will find it increasingly
difficult to compete in global markets. in Q1 and likely Q2 of 2013. The expectation is for placements to
continue to decline in the next two to three months as feedlots
On the same day that EPA rejected the request for waiv-
struggle with margins. It is notable, however, that despite fewer
ing the ethanol mandate, a USDA survey of feedlots showed
cattle coming to market, overall beef production has held up rela-
further dramatic reductions in the number of cattle placed
tively well, in large part because of big gains cattle weights. Con-
on feed. The survey results came in very close to pre-report esti-
sider that for the period Jul - Sep, steer slaughter per marketing
mates and will likely have a limited impact on futures markets.
day was on average 1.5% lower than a year ago but beef produc-
Feedlot placements have been declining steadily since feed prices
tion was up 0.3% (note this is adjusted on a per marketing day
rocketed higher in June. Accumulated placements since June are
basis). Steer weights are currently running around 873 pounds
down 1.3 million head. The survey indicated that as of November
per carcass, 2% higher than a year ago. This has helped offset
1, there were 11.254 million head of cattle on feed, 293,000 head or
some of the slaughter reductions and keep beef prices in check.
5.3% less than a year ago. October placements were 2.180 million
The key risk to the market is if/when carcass weight gains slow
head, 12.5% lower than last year (pre-report estimates were looking
down. Winter weather is always a wild card, more so today when
for a 12.7% decline). The current pace of placements is consistent
feedlot supplies are especially tight.
with the forecast for a notable decline (-5% or so) in cattle slaughter
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2. Page 2
Vol. 10, No. 224 / November 19, 2012
PRODUCTION & PRICE SUMMARY Week Ending 11/17/2012
Current Pct. Pct. Y/Y %
Item Units Week Last Week Change Last Year Change YTD Change
17-Nov-12 10-Nov-12 19-Nov-11
Total Red Meat & Poultry mil lbs., cwe 1,807 1,772 1.98% 1,763 2.50% 77,551 -0.7%
FI Slaughter Thou. Head 629 631 -0.32% 639 -1.50% 28,728 -3.9%
C FI Cow Slaughter ** Thou. Head 139 138 0.33% 147 -5.41% 5,354 -4.7%
A Avg. Live Weight Lbs. 1319 1323 -0.30% 1292 2.09% 1,302 1.9%
T Avg. Dressed Weight Lbs. 797 798 -0.13% 771 3.37% 789 2.2%
T Beef Production Million Lbs. 499.9 502.6 -0.54% 491.1 1.79% 22,629 -1.7%
L Live Fed Steer Price $ per cwt 124.94 124.75 0.15% 122.87 1.68%
E Dressed Fed Steer Price $ per cwt 195.13 195.01 0.06% 196.07 -0.48%
OKC Feeder Steer, 600-700 $ per cwt 146.66 149.98 -2.22% 147.48 -0.56%
& Choice Beef Cutout $ per cwt 193.17 193.14 0.02% 194.52 -0.69%
Hide/Offal $ per cwt, live wt 12.93 12.88 0.39% 12.35 4.70%
B Rib, Choice $ per cwt 317.63 312.84 1.53% 322.05 -1.37%
E Round, Choice $ per cwt 164.98 170.13 -3.03% 166.81 -1.10%
E Chuck, Choice $ per cwt 155.95 156.08 -0.08% 158.11 -1.37%
F Trimmings, 50% $ per cwt 73.99 75.33 -1.78% 125.29 -40.95%
Trimmings, 90% $ per cwt 204.87 204.41 0.23% 182.10 12.50%
FI Slaughter Thou. Head 2,366 2,361 0.21% 2,369 -0.11% 98,651 2.0%
FI Sow Slaughter ** Thou. Head 60.2 60.5 -0.42% 66.1 -8.93% 2,541 -0.5%
H Avg. Dressed Weight Lbs. 204.0 204.0 0.00% 208.0 -1.92% 206 0.1%
O Pork Production Million Lbs. 483.5 481.5 0.42% 492.9 -1.91% 20,271 2.1%
G Iowa-S. Minn. Direct Wtd. Avg. 76.05 78.85 -3.55% 80.69 -5.75%
S Natl. Base Carcass Price Wtd. Avg. 79.34 80.65 -1.62% 82.07 -3.33%
Natl. Net Carcass Price Wtd. Avg. 81.57 82.99 -1.71% 84.30 -3.24%
Pork Cutout 200 Lbs. 82.99 86.27 -3.80% 89.22 -6.98%
Hams $ per cwt 65.89 72.25 -8.80% 78.97 -16.56%
Loins $ per cwt 85.01 88.57 -4.02% 96.59 -11.99%
Bellies $ per cwt 125.00 132.58 -5.72% 106.55 17.32%
C Young Chicken Slaughter * Million Head 154.6 148.3 4.23% 151.3 2.23% 6,870 -3.4%
H Avg. Weight (Live) Lbs. 5.93 5.87 1.02% 5.75 3.13% 5.75 0.2%
I Chicken Production (RTC) Million Lbs. 692.3 657.5 5.29% 652.3 6.13% 29,750 -2.2%
C Eggs Set Million 191.3 180.8 5.79% 194.2 -1.51% 8,723 -2.5%
K Chicks Placed Million Head 147.3 151.7 -2.94% 152.2 -3.22% 7,290 -2.0%
E 12-City Broiler Price Composite 91.60 88.99 2.93% 75.07 22.02%
N Georgia Dock Broiler Price 2.5-3 Lbs. 95.79 95.64 0.16% 87.98 8.88%
Northeast Breast, B/S $/cwt 130.29 131.1 -0.62% 117.52 10.87%
Northeast Legs $/cwt 72.55 67.97 6.74% 68.31 6.21%
T Young Turkey Slaughter * Million Head 5.857 5.698 2.79% 5.701 2.74% 202.637 -0.3%
U Avg. Live Weight Lbs. 28.03 28.6 -1.99% 27.77 0.94% 30.01 1.2%
R Turkey Production (RTC) Million Lbs. 131.3 130.4 0.70% 126.6 3.67% 4,902 2.0%
K Eastern Region Hen Price 8-16 Lbs. 107.07 110.04 -2.70% 111.42 -3.90%
G Corn, Omaha $ per Bushel 7.43 7.62 -2.49% 6.25 18.88%
R DDGs, Minnesota $ per Ton 285.00 252.50 12.87% 212.50 34.12%
A Wheat, Kansas City $ per Bushel 8.45 8.90 -5.06% 6.47 30.60%
I Soybeans, S. Iowa $ per Bushel 14.20 15.11 -6.02% 11.74 20.95%
N Soybn Meal, 48% Decatur $ per Ton 450.50 482.40 -6.61% 285.50 57.79%
* Chicken & turkey slaughter & production are 1 week earlier than the date at the top of this sheet.
** Cow and sow slaughter reflect levels from two weeks ago due to reporting lag.