CHICAGO, Ill. (Reuters) — Chicago cattle futures fell more than two percent Jan. 30, following a bearish cattle on feed report in the United States.
American feedlots brought in 18 percent more cattle in December than in the same month in 2015, the U.S. Department of Agriculture said.
That topped forecasts and reached a six-year high for that month.
Higher prices for slaughter-ready, or cash, cattle in December improved profit for feedlots.
That increased income allowed feedlots to draw more animals off winter wheat grazing pastures in parts of the U.S. Plains, said analysts.
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“We had a bullish trend occurring in December with cattle prices, and last month’s placements may have been the result of low placements in September and October,” said Allendale Inc. chief strategist Rich Nelson.
David Anderson, a Texas A&M University economist, attributed December’s huge placements to mild weather in the fall and early winter in parts of the northern Plains, which kept a large number of cattle out on pasture.
“In early December, the situation changed and winter hit. It forced some ranchers to sell a lot of heavy calves,” said Anderson.
Also, more heifers entered feedlots because of the extended period of poor profitability among cow-calf producers.
Cattle placed in commercial feeding pens last month could begin arriving at packing plants in June, which could pressure cattle prices at that time, said Nelson.
USDA’s report showed December placements at 1.795 million head, a substantial increase from 1.527 million in December 2015.
That was above analysts’ average forecast of 1.655 million and the highest for that month since 1.8 million in December 2010.
The government put the feedlot cattle supply as of Jan. 1 at 10.605 million head, about steady with the previous year’s 10.575 million.
Analysts, on average, had forecast a one percent decline.
The government said the number of cattle sold to packers, or marketings, grew seven percent in December from a year earlier, to 1.787 million head.
Analysts had projected a 6.7 percent rise from 1.674 million last year.
Friday’s report included quarterly numbers for heifers on feed as of Jan. 1 at 3.58 million head, up from 3.4 million a year ago.
This suggests slower herd expansion after cow-calf producers suffered a long stretch of lower profits, said Anderson.
