The number of cattle being fattened for the dining table on U. S. feedlots fell to their lowest level in seven years, but higher beef prices are still unlikely amid the sluggish economy, analysts said Jan. 22.
The number of cattle placed at these feedlots in December fell to an 11-year low due to winter storms, fewer available feeder cattle and high feed costs.
“Placements during December were at an 11-year low and that helped on-feed (supply) drop to a seven-year low,” said Rich Nelson, livestock analyst with Allendale Inc.
Poor weather conditions would raise the cost of feeding cattle. With the economy weak, some feedlots were unable to obtain financial backing, while high U. S. unemployment kept beef demand down.
“We had two significant storms going on during December and we have not seen better beef demand show up yet,” Nelson said.
The U. S. Department of Agriculture reported the on-feed cattle supplies at major feedlots as of Jan. 1 at about 11 million head, 98 per cent of last year’s supplies. Traders’ expectations averaged 98.4 per cent, in a range of 97 to 99.3 per cent.
The on-feed number was the lowest Jan. 1 number since supplies were at 10.658 million head in 2003.
Placements of cattle on to feed during December, one of the most watched parts of any Cattle on Feed Report, showed numbers at 94 per cent of last year. This compared with an average trade estimate of 95 per cent.
December placements were at their lowest level for the month since 1998 when placements totalled 1.512 million head.
Another part of the report that analysts liked was the marketing number, which exceeded last year’s level. This showed feedlots were willing to move cattle to market even though the prices were not as high as needed to bring profits.
“We had a report that is fundamentally positive to the front part of the market because marketings were more aggressive than we thought,” said Don Roose, president of U. S. Commodities Inc.
USDA put the December marketing number at 104 per cent of last year, above the high end of estimates that ranged from 101 per cent to 103.5 per cent of last year.
And marketings look like they continued strong this month with packers increasing the cattle kill compared to last year.