Cattle placement in U.S. feedlots takes surprise jump

The number of cattle placed in U.S. feedlots rose in November, according to the U.S. Agriculture Department, surprising analysts, who attributed the increase to record-high cattle prices and a seven per cent pull back in corn prices last month.

USDA’s monthly cattle on feed report on Friday showed placements up four per cent in November versus a year earlier — while analysts polled by Reuters, on average, had expected a drop of 0.3 per cent.

"The two main reasons for the higher number is simply fed cattle prices set record highs and were strong throughout the month and corn prices came down somewhat," said Dan Vaught with Vaught Futures Insights.

Many analysts had expected a decline in placements on ideas the severe drought in the U.S. Southwest had reduced the number of available cattle. There were analysts who had predicted more placements because of cattle from non-drought areas.

Analysts predicted the increase in placements will weigh on Chicago Mercantile Exchange (CME) live cattle futures. The calls were subject to developments in the euro zone debt crisis and other news that could influence prices.

Cash cattle prices in parts of the Plains last month soared to a record $127 per hundredweight, ignited by strong demand for choice beef from retailers such as Wal-Mart (all figures US$).

That also sent retail choice beef prices in November to a record high $5 per pound, according to separate USDA data.

States such as Nebraska and Colorado had some of the biggest increases in placements because of a seasonal exodus from grazing land to feedlots and corn prices continuing their slump from a record high $8 per bushel in June.

"We’ve got corn in the north. So, the availability of the feed and corn values came down to a price that was sensible and you could lock in the crush to make money," said analyst Don Roose of U.S. Commodities.

USDA also showed a four per cent increase in feedlot cattle supplies from a year earlier, which was nearly in line with a 3.8 per cent gain expected by analysts.

And, USDA said cattle marketings last month were steady with a year ago, versus estimates for a 1.6 per cent decline.

Rich Nelson, director of research with Allendale Inc., said the marketing figure implies "muted" cash cattle prices for the first half of next year compared to expectations of a few months ago. Also, there should be no relief from high retail beef prices.

"The clear delayed reaction between cash cattle and beef at retail will ensure consumers pay high beef prices for at least the next two months," said Nelson.

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