CHICAGO, April 22 (Reuters) — Cattle placements into U.S. feedlots in March were up five percent over the same month last year and were the highest for the month in five years.
However, the placement number was slightly less than average industry forecasts.
Weak feedlot margins and the lingering impact of historic losses in the cattle industry resulted in the modest placement shortfall relative to trade expectations, said Rich Nelson, chief strategist for Allendale Inc.
The U.S. Department of Agriculture report said most of the increase in placement was with cattle weighing over 800 pounds of more, many of which were left out on healthy grazing pastures as feedlots and ranchers struggled with reduced livestock prices.
Read Also
Green lentil market oversupplied
Farmers in Western Canada can expect price pressure on their new crop of green lentils, as the available supplies among the world’s major lentil-growing nations increase significantly.
Cattle that entered feedlots in March will begin arriving at packing plants around August, analysts said. That could weigh down late summer prices.
The USDA report showed March placements at 1.892 million head, up five percent from 1.809 million last year, and below analysts’ average forecast of 1.925 million. It was the largest March placement since the 1.904 million reported in 2011.
The USDA put the feedlot cattle supply as of April 1 at 10.853 million head, above the 10.797 million a year ago and nearly matching analysts’ average forecast.
The number of cattle sold to packers, or marketings, was 1.747 million head in March, up seven percent from a year ago.
Analysts had projected a 6.1 percent increase from 1.631 million last year.
The slightly smaller than expected placement number supported cattle futures when trading resumed April 25.
But the large number of heavy placements could be problematic.
Jim Robb, director of the Livestock Marketing Information Center said that if the futures market is mostly basing its price forecast on supply, then it must be assuming a number much larger than what the cattle on feed report implies.
“Recent cattle on feed reports do not indicate supplies that will collapse the fed cattle market, like happened in late 2015,” Robb wrote in a report.
“The general expectation is for price erosion. But, do expect to see prices below year ago levels and below early 2016 for both fed and feeder cattle moving into this summer and fall.”
Live cattle futures tumbled more than five percent last week in anticipation of increased cattle supplies later this year.
Friday’s USDA report included the number of heifers on feed as of April 1 at 3.5 million head, up 150,000 head from a year ago, which partly reflects the rate of herd expansion and the fact that more heifers were being held back for breeding last year.
“To date, herd growth is about at the same pace as last year, but will probably slow down through the balance of this year as more heifers come on feed,” Robb said.
