Ongoing shortfall of replacement cattle spurs feedlots to hold on to their inventory
Reduction in December placements is a continuation of a trend.
Large feedlots placed 1.642 million head of cattle on feed in December 2024, 56,000 head (-3.3%) less than a year ago, and the lowest since December 2015.
Analysts polled ahead of the report were thinking placements would be higher compared to last year’s very low number. They appeared to underestimate the suspension of cattle imports from Mexico. Annually, more than 1 million feeder cattle come from Mexico, accounting for 5% of fed cattle slaughter. In the past two months alone, we think the suspension has kept over 250,000 Mexican feeder cattle from entering the US cattle supply.
Placements in Texas feedlots in December 2024 were 255,000 head, a decline of 75,000 head (-23%) compared to last year. California is not a major cattle feeding state, and yet placements there were down another 15,000 head (-16%). These declines offset any increases elsewhere in the country.
The lack of Mexican cattle supplies is only part of the story, however. Next week, the US Department of Agriculture will provide the results of the annual survey of cattle operations across the country. Feeders outside feedlots are expected to be sharply lower and so are inventories in small feedlots that are not represented in the monthly survey.
The reduction in December placements is a continuation of a trend. In the last four months (Sep–Dec), feedlots with 1,000+ head capacity placed 7.860 million head on feed, 626,000 head (-7.4%) less than what they placed five years ago. This trend is likely to continue for the next two years due to fewer calves born each year and more female calves retained for breeding.
In the near term, the supply of feedlot market-ready cattle (cattle that have been on feed for more than 120 days) is still near year-ago levels. However, ongoing shortfall of replacement cattle has induced feedlots to hold on to their inventory for longer. Compounding the issue is a slowdown in carcass weight gains due to adverse weather—a combination that has been particularly challenging for packers.
By the end of last week, packers were forced to fold and paid as much as $212/cwt live, a new record high. Beef prices were up in 2024, but that was largely a function of demand, not supply. In the coming year, supply will play a more significant role, and likely drive prices even higher.
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