U.S. October Feedlot Cattle Placements Jump Implies Low Prices in 2018

Ranchers in October put 10.2 percent more cattle into U.S. feedlots than the same period last year, the U.S. Department of Agriculture reported on Friday.

The result surpassed analysts' average prediction. It also was the highest for the month in six years, suggesting weaker cattle prices beginning this spring while faced with uncertain beef demand, analysts said.

"Cattle numbers are going to be large, particularly during the second half of the year. But it's just a matter of are we going to sell the meat," said U.S. Commodities President Don Roose.

Less-costly feed, and increased supplies as heavier calves transition from summer grazing pastures to fall programs, ultimately contributed to the seasonal bump in last month's placements, analysts said.

Packers paid feedlots more for their cattle, which allowed them to buy calves to fatten. And a growing number of heifers entered feedyards - a sign that some ranchers may be reducing their herds.

Analysts said that given Friday's bearish placement result, Chicago Mercantile Exchange live cattle futures on Monday might open 0.500 to 1.000 cent per pound lower.

"Live cattle contracts look pretty lofty relative to the supplies that we think are coming," said Texas A&M University economist David Anderson.

USDA's report showed October placements at 2.393 million head, up 10.2 percent from 2.171 million a year earlier and above the average forecast of 2.337 million.

It was the largest October placement figure for the month since 2.407 million in 2011, according to Anderson.

The government put the feedlot cattle supply as of Nov. 1 at 11.332 million head, up 6.2 percent from 10.665 million a year ago. Analysts, on average, forecast a 5.7 percent rise.

USDA said the number of cattle sold to packers, or marketings, were up 5.6 percent in October from a year ago to 1.801 million head.

Analysts had projected a gain of 5.4 percent from 1.705 million last year.

"We just have a lot of supply," said Anderson. That, coupled with profitable opportunities for some feedlots, imply the industry is moving cattle quickly, he said.

Anderson said that heifers either held back from last year, or ranchers not deciding to add them to the herd for whatever reason, boosted October placements.

"Which means we're rapidly slowing the rate of herd expansion," Anderson said.

 

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