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Tight feedlot supply pressures fed cattle futures price higher

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Published: February 24, 2010

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CHICAGO, Ill. (Reuters) – The number of U.S. cattle in feedlots is the lowest in seven years, helping to sustain a rally that began in early February.

The U.S. Department of Agriculture reported Feb. 19 that 10.989 million cattle were in U.S. feedlots as of Feb. 1, the lowest for that date since 2003.

“We have probably (already) priced in (to the market) this cattle report,” said Allendale Inc. analyst Rich Nelson .

Chicago February fed cattle futures set a 15-month high Feb. 19 of 93 cents US per pound before closing at 92.775 cents.

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USDA’s January placements of 1.825 million head, or 98 percent of a year ago, were slightly larger than expected.

Harsh weather and losses on cattle sales had analysts predicting lower January placements because feedlots were reluctant to add new cattle last month.

“Weather, the fact the cattle feeder has been losing money for a long period of time, and the fact that there is not a whole lot of feeder cattle out there is why we were forecasting a low placement number,” said University of Missouri agricultural economist Ron Plain.

USDA reported marketings at 1.774 million head, or 102 percent of a year ago, while analysts expected 101 percent on average.

“The placements were at the high end of expectations, but the marketings were good,” said Archer Financial livestock broker Dennis Smith.

Cash cattle traded about $3 higher last week at $92 per hundredweight, the highest since November 2008.

Nelson predicted cash cattle prices should trend higher through mid-March before taking a seasonal turn lower.

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