Feedlot Purchases Fall, Surprising Some Analysts

January 26, 2013 11:00 PM

Copyright 2013 Bloomberg.

By Elizabeth Campbell

U.S. feedlots bought 0.5 percent fewer cattle in December compared with a year earlier, the government said, surprising analysts who were expecting an increase.

Feedlots bought 1.664 million head of cattle last month, down from 1.673 million in December 2011, the U.S. Department of Agriculture said today in a report. The average estimate of 12 analysts surveyed by Bloomberg News was a 2.9 percent increase. The feedlot herd totaled 11.193 million as of Jan. 1, 5.6 percent less from a year earlier. Analysts expected the inventory to be down 4.6 percent.

Most analysts predicted a rise in feedlot purchases, as the country’s worst drought since the 1930s dried out pastures in the Great Plains. About 27 percent of the High Plains region was in "exceptional" drought as of Jan. 22, the U.S. Drought Monitor shows, up from 0.1 percent a year earlier. The price of corn, the main ingredient in feed, is up 14 percent in the past year.

"There’s just a struggle for the supply, so you’re seeing less numbers" of animals, Chad Henderson, the president of Prime Agriculture Consulting Inc. in Brookfield, Wisconsin, said in a telephone interview. "In order to make money having cattle on feed, you need to have supplies of onsite cheap feed. That’s a limiting factor. That’s going to lead to lower placements figures."

Feedlot operators buy year-old animals that weigh 500 pounds (227 kilograms) to 800 pounds, called feeders. The cattle are fattened on corn for about four to five months until they weigh about 1,200 pounds, when they are sold to meatpackers.

Feedlots sold about 1.745 million animals to meatpackers last month, down 1.7 percent from a year earlier, the USDA said. Analysts expected 6.6 percent drop, on average.

Fattened-cattle futures for April delivery climbed 0.3 percent to settle at $1.3075 a pound at 1 p.m. on the Chicago Mercantile Exchange. The price has fallen 1.2 percent in January.

Feeder-cattle futures for March settlement closed unchanged at $1.4795 a pound, and the commodity has lost 4.1 percent this month. 

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