Feedlots are still losing money, but lower prices for calves are allowing them to buy more and shore up sagging profits
CHICAGO, Ill. (Reuters) — The number of cattle placed into U.S. feedlots in April jumped seven percent from a year earlier, according to a government report May 20.
The number far exceeded most analysts’ forecasts.
Analysts said feedlots were still operating at a loss, but lower prices for young calves allowed feedlots to buy more of them for fattening, which helped shore up sagging bottom lines.
The U.S. Department of Agriculture’s data showed the number of heavier cattle placed in April rose almost 12 percent from the year-ago month. Analysts said this could pressure prices for slaughter-ready animals in the fourth quarter.
“There are a lot of big cattle out there that are getting placed,” said University of Missouri livestock economist Ron Plain.
“If you don’t have a drought, and you’ve got grass, there is an incentive to keep them on pasture longer.”
The USDA report showed April placements at 1.664 million head, up seven percent from 1.548 million last year. It was much higher than analysts’ average forecast of 1.536 million and the highest for April since 1.738 in 2013.
The USDA put the feedlot cattle supply as of May 1 at 10.783 million head, up one percent from 10.640 million a year ago. Analysts, on average, had forecast a marginal increase.
The government said the number of cattle sold to packers, or marketings, rose one percent in April from a year ago, to 1.658 million head.
Analysts projected a 2.4 percent increase from 1.639 million last year.
Plain called the placement result “a bearish surprise” led by the dramatic improvement in the financial situation at feedlots.
Jessica Sampson, an economist with the Colorado-based Livestock Marketing Information Center, said that although estimated feedlot margins in April were at a loss of $5.98 per head of cattle, it was still a dramatic improvement over the $105.38 per head loss in March.
Strong April placements were largely reported in the southern Plains, where last year they were dramatically smaller, said Sampson.
Analysts said USDA’s data may pressure Chicago Mercantile Exchange live cattle futures with the October and December contracts down as much as one cent per pound, despite market losses May 20 before the report’s release.