Feedlots Bought 6% More Cattle as Cheaper Corn Revives Outlook

U.S. feedlot owners unexpectedly increased the number of cattle added to their herds in March compared with a year earlier as a drop in corn costs improved prospects for an end to operating losses.

About 1.899 million head of cattle entered feedlots, up 6 percent from 1.792 million in March 2012, the U.S. Department of Agriculture said today in a report. Thirteen analysts surveyed by Bloomberg News forecast a 1.5 percent decrease, on average. The feedlot herd totaled 10.909 million as of April 1, down 5 percent from a year earlier. Analysts expected the inventory on feed to be 5.8 percent lower.

The price of corn, the main ingredient in livestock feed, declined 1.2 percent in March and prices tumbled into a bear market this month after the government said March 28 that inventories will be bigger than analysts forecast and farmers will plant the most acres this year since 1936.

“The feedlots were anxious to put in feeders with corn values drifting lower and in anticipation of lower values,” Don Roose, the president of U.S. Commodities Inc. in West Des Moines, Iowa, said in a telephone interview. “We think the outlook for profitability and bottom line was better.”

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 four to five months until they weigh about 1,300 pounds, when they are sold to meatpackers.

Feedlots sold about 1.771 million animals to meatpackers last month, down 7.7 percent from a year earlier, the USDA said. Analysts expected a 6.1 percent drop, on average.

Cattle futures for June delivery fell 0.5 percent to $1.20775 a pound at 11:39 a.m. on the Chicago Mercantile Exchange. The price is down 8.3 percent this year through yesterday.

Feeder-cattle futures for August settlement declined 1 percent to $1.4575 a pound. Prices were down 4.6 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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