A Preview of the Usefulness of Placement Weight Data

Knowing the number, timing, and weights of cattle placed on feed should be useful in forecasting beef supply. In 1996, the USDA began reporting cattle-on-feed placements in various weight groups. Placement weight data may improve beef supply forecasts because knowledge of placement weight distributions will provide information regarding expected slaughter timings. Currently, monthly USDA placement weight data are not numerically sufficient to derive and test statistical relationships between placement weights and slaughter. However, private data were collected to estimate placement weight data back to 1985. Placement weight data were estimated and used in various models to determine if they improve beef supply forecasts, fed-cattle price forecasts, and economic returns from using this information for selectively hedging. Use of placement weights improved beef supply forecasts only at a one-month horizon; it contributed nothing to price forecast accuracy or returns from selectively hedging. The futures price was the best fed-cattle price forecast among several tested. This suggests a better measure of placement weight data value is it impact on live-cattle futures prices, rather than price forecasting.