High profits see U.S. feedlots chasing more cattle in Feb.

Placements were down in California but up in Iowa, Nebraska and Texas

CHICAGO, Ill. (Reuters) — The number of cattle placed in U.S. feedlots in February grew 15 percent from a year ago, a government report showed March 21.


Record-high prices for cattle encouraged feedlots to bring in more calves for fattening.


The U.S. Department of Agriculture report showed February placements at 1.650 million head, up 15 percent from 1.438 million a year earlier. Analysts expected a 9.2 percent increase.


“This is an aberrantly large placements figure,” said Linn Group analyst John Ginzel.


“Apparently the high profitability of cattle being marketed now gives the feed yards a lot of money to burn holes in their pockets, so they’re out chasing cattle.”


Feedlots made an average profit of $44 per head in February on cattle sold to meat companies, compared to $45 in January, as calculated by the Livestock Marketing Information Center in Colorado.


Drought-stricken grazing pastures in California drove cattle outside the state to feed yards in the U.S. Plains.


USDA data showed that the number of cattle placed in feedlots in California last month dropped 24 percent from last year, but those in Iowa jumped 41 percent, Nebraska rose 26 percent and Texas increased 22 percent.


Reduced placements in California suggest many of the cattle there may have already been moved out of the state, said Elaine Johnson, an analyst with CattleHedging.com.


“In Nebraska they have plenty of feed, including distillers grains, that make their cost of gains significantly cheaper than in states in the south,” Johnson said.


Rich Nelson, chief strategist with Allendale Inc., said cattle placements increased 6.6 percent from October to February, compared to the same period in the previous year.


“We’re going to have a wall of cattle hitting in the mid to late summer period, which will come on top of the typical increase in slaughters that time of year.”


Burdensome supplies in the summer and early fall could bring relief to beef prices that are at record highs because of tight supplies, he said.


The average beef retail price reached a record $5.58 per pound in February, based on USDA data.


The USDA put the feedlot cattle supply as of March 1 at 10.790 million head, down one percent from 10.845 million a year earlier. Analysts had expected a drop of 1.2 percent.


The supply outcome was the smallest for March since 10.420 million in 1999.


Analysts said last month’s placement increase resulted in a supply outcome that was bigger than the previous month but still smaller than last year.


The March 1 supply figure confirms cattle numbers remain tight after several years of drought damaged crops, which reduced the overall U.S. herd to the lowest level in 63 years.


The government showed that packers bought 1.549 million cattle in February, down three percent from 1.603 million last year. 


Analysts had expected a 3.3 percent decline.


February’s marketing result was the smallest for the month since the USDA began the data set in 1996.


The cattle-on-feed report had little impact on Chicago live cattle futures when trade opened March 24.

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