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U.S. feedlots draw more cattle than expected in May

Report called mildly bearish for CME live cattle

Chicago | Reuters — Ranchers in May drove more cattle into U.S. feedlots than anticipated compared with the same period a year ago, said analysts after Friday’s U.S. Department of Agriculture monthly Cattle on Feed report.

The data also showed the June 1 feedlot cattle supply climbed 4.1 per cent from a year earlier — its highest for the month since USDA began tabulating the data in 1996.

Analysts attributed last month’s unexpected feedlot inflow to a surge in feeder cattle, from Canada and Mexico.

Some analysts had predicted that fewer cattle entered feedlots in May due to low livestock prices at the time, which eroded feedlot margins.

Chicago Mercantile Exchange live cattle futures on Monday may have a mildly bearish reaction to Friday’s report, analysts said. But traders may soon turn to near-term market fundamentals such as beef demand and cattle prices, they added.

USDA’s report showed May placements at 2.124 million head, compared with 2.119 million a year earlier. It was above the average estimate of 2.026 million head.

The government put the feedlot cattle supply as of June 1 at 11.553 million head, up 4.1 per cent from 11.096 million a year ago. Analysts, on average, forecast a 3.4 per cent increase.

USDA said the number of cattle sold to packers, or marketings, were up 5.4 per cent in May from a year ago to 2.056 million head.

Analysts had projected a 5.1 per cent increase from 1.951 million last year.

There were a few more cattle placed in May than anticipated, which stops two consecutive months of lower-than-last-year placement numbers, said Allendale Inc. chief strategist Rich Nelson.

The influx of Mexican and Canadian feeder cattle raises questions about the June placement figure in the next report, said Nelson.

Feeder cattle imports from Canada rose, an impact of a longer-term effect of a major feedyard closing in Western Canada, said Livestock Marketing Information Center senior economist Katelyn McCullock.

Drought conditions in parts of Mexico landed more of those cattle in U.S. feedlots, coupled with a high volume of feeder cattle that moved through auction markets, she added.

“I don’t think these placements necessarily set a new trend moving forward. I wouldn’t be surprised to see placements again below a year ago between now and fall,” said McCullock.

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

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