Chicago | Reuters — Ranchers drove 7.3 per cent more cattle into U.S. feedlots in February than a year ago, the U.S. Department of Agriculture reported on Friday, the most for the month in 16 years.
Persistent drought in the U.S. Plains withered winter wheat grazing pastures, which forced beef cattle into feedyards in states noted for growing corn such as Iowa and Kansas, said analysts.
“This is a dry weather story… and not great news for the trade,” said Allendale Inc chief strategist Rich Nelson, regarding USDA’s placement result that was near the high end of the range of analysts’ forecasts.
Larger cattle numbers means more beef tonnage around the late summer and early fall period, said Nelson.
Another factor behind February’s placement buildup was that packers paid feedlots enough for their cattle to turn a profit, which allowed them to buy calves to fatten, analysts said.
Monday’s Chicago Mercantile Exchange live cattle futures may open lower based on Friday’s report, said analysts.
But substantial market losses on Friday, partly tied to trade war fears, might lessen some of the report’s bearish implications, said analysts.
Most of Friday’s futures sell-off was on worries about a potential trade war between the U.S. and China in addition to increased near-term supplies, said Nelson.
“But I think there is more to go,” said Nelson regarding potential further market weakness come Monday.
USDA’s report showed February placements at 1.817 million head, up from 1.694 million a year earlier and above the average forecast of 1.766 million.
It was the largest placement result for the month of February since 1.82 million in 2002, according to analysts.
The government put the feedlot cattle supply as of March 1 at 11.715 million head, up 8.8 per cent from 10.772 million a year ago. Analysts, on average, forecast a 8.2 per cent increase.
USDA said the number of cattle sold to packers, or marketings, were up 1.6 per cent in February from a year ago to 1.675 million head.
Analysts had projected a 1.2 per cent rise from 1.648 million last year.
Katelyn McCullock, senior economist with the Livestock Marketing Information Center, said the southern Plains continued to see some drought impacts based on lighter-weight animals going into feedlots — including feeder cattle arriving from Mexico.
“The cattle that are coming in across the border are going straight to feedlots as opposed to onto pasture or on some forage,” said McCullock.
— Reporting for Reuters by Theopolis Waters in Chicago.