Bloomberg News

Feedlots Place 14% Fewer Cattle as Costs Increased, USDA Says

March 22, 2013

U.S. feedlots placed 14 percent fewer cattle in February compared to a year earlier -- a bigger drop than expected -- as profit prospects and animal supplies declined.

Feedlots purchased or placed 1.482 million young animals last month, down from 1.714 million in February 2012, the U.S. Department of Agriculture said today in a report. Eleven analysts surveyed by Bloomberg News forecast a 9.1 percent drop, on average. Placements were the lowest for the month since the government began tracking the figure in 1996. The feedlot herd totaled 10.857 million as of March 1, down 7 percent from a year earlier. Analysts expected a 6.4 percent decline.

Feedlots placed 1.6 percent more cattle in January than a year earlier, which left fewer animals available for placement in February, said Elaine Johnson, an analyst at Cattlehedging.com. Corn, the main ingredient in livestock feed, gained 14 percent in the 12 months through yesterday, raising costs for feedlots. This will result in “slightly negative” profit margins in 2013, Wells Fargo & Co. has forecast.

“Prospective feeding profits were nonexistent,” Johnson, based in Westminster, Colorado, said in an interview before the report. “That tends to cool down that interest” in placing animals, she said.

Feedlot operators typically buy year-old animals that weigh 500 pounds (227 kilograms) to 800 pounds, called feeders. The cattle are fattened on corn for about four to five months until they weigh about 1,300 pounds, when they are sold to meatpackers.

Feedlots sold about 1.638 million animals to meatpackers last month, down 6.7 percent from a year earlier, the USDA said. Analysts expected 7.1 percent decline, on average. February 2013 had one fewer weekday than the previous year.

Fattened cattle futures for June delivery fell 0.4 percent to $1.215 a pound at 12:13 p.m. on the Chicago Mercantile Exchange. The price slumped 7.8 percent this year through yesterday.

Feeder-cattle futures for May settlement rose less than 0.1 percent to $1.4055 a pound, and the commodity was down 8.9 percent in 2013 through yesterday.

To contact the reporter on this story: Elizabeth Campbell in Chicago at ecampbell14@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net.


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