Drought lands more cattle into U.S. feedlots than expected

Chicago | Reuters — Ranchers sent nearly one per cent more cattle to U.S. feedlots in December than the same time a year earlier, the U.S. Department of Agriculture reported on Friday.

The result topped most analysts’ predictions, mainly led by worsening drought in the U.S. southern Plains that shriveled available winter wheat grazing pasture.

Corn Belt states were the recipients of cattle from areas of Montana, North Dakota and South Dakota where insufficient moisture persists.

“These very dry conditions that are developing in wheat pasture country drove change in placements in November. And I suspect we got some of that in December also,” said Texas A+M University economist David Anderson.

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Some analysts cited cheaper feed, which lowered input costs for feedlots, as another reason behind last month’s placement uptick.

And more heifers are entering feedlots, suggesting to analysts that the rate of cattle herd expansion is slowing.

Chicago Mercantile Exchange live cattle futures may open lower Monday following USDA’s report, but could quickly rebound spurred by higher-than-expected prices for market-ready, or cash, cattle later on Friday.

USDA’s report showed December placements at 1.799 million head, up 0.8 per cent from 1.785 million a year earlier and exceeded the average forecast of 1.73 million.

The government put the feedlot cattle supply as of Jan. 1 at 11.489 million head, up 8.3 per cent from 10.605 million a year ago. Analysts, on average, forecast a 7.7 per cent rise.

USDA said the number of cattle sold to packers, or marketings, were down 1.4 per cent in December from a year ago to 1.752 million head.

Analysts had projected a 1.2 percent drop from 1.777 million last year.

“The big placement figure tells you that we’re going to have big numbers of cattle coming at us for the foreseeable future,” said U.S. Commodities president Don Roose. He too alluded to the bump in feedlot cattle placements in Corn Belt states where feed is more plentiful.

“You continue to be in a drought in the southern Plains, that continues to expand, so it no doubt is another factor that you have to throw into the placement discussion,” said Roose.

— Theopolis Waters reports on livestock markets for Reuters from Chicago.

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