Feeder Cattle Fall as Losses on Feedlots Seen Reducing Purchases

Feeder-cattle futures dropped for the sixth straight session on speculation that demand will slow as high U.S. feed costs discourage purchases of the animals. Cattle and hog futures were little changed.

Feedlots, which buy cattle and raise them on mostly grain until they are fat enough to sell to beef processors, will have “slightly negative” profit margins in 2013 because of high feed costs, Michael Swanson, an agricultural economist at Wells Fargo & Co., said on Feb. 6. Beef demand is expected to drop 2 percent this year, partly on lower income, Cattlefax said today.

“With the feeders losing money, they’re sick of paying up for the feeder cattle,” Lane Broadbent, a vice president at KIS Futures Inc. in Oklahoma City, said by telephone today. “They also know there’s going to be some cattle coming in off of pastures soon.”

Feeder-cattle futures for March settlement fell 0.7 percent to $1.46225 a pound at 10:54 a.m. on the Chicago Mercantile Exchange. The price through yesterday dropped 1.6 percent this month.

Cattle futures for April delivery were down 0.1 percent at $1.3135 a pound on the CME. Hog futures for April settlement fell 0.1 percent to 86.4 cents a pound in Chicago.

To contact the reporter on this story: Tony C. Dreibus in Chicago at tdreibus@bloomberg.net

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