U.S. Feedlots Reduce Cattle Purchases on Shrinking Supply

U.S. feedlots bought 11 percent fewer cattle in August than a year earlier, a bigger than expected decline, on signs that the number available for sale shrank and higher corn costs curbed profitability.

Feedlots bought 2.002 million head of cattle last month, down from 2.246 million in August 2011, the U.S. Department of Agriculture said today in a report. Thirteen analysts surveyed by Bloomberg News projected a 5.6 percent drop, on average. The figure was the lowest for the month since the USDA began tracking the statistic in 1996. The feedlot herd totaled 10.637 million as of Sept. 1, down 0.6 percent from a year earlier. Analysts expected the inventory on feed to be little changed.

The price of corn, the main ingredient in livestock feed, has surged 48 percent since June 15 as the worst U.S. drought in 56 years eroded the harvest potential. The strong feed costs “curtailed interest in new calves and feeders,” Rich Nelson, the chief strategist at Allendale Inc. in McHenry, Illinois, said in an e-mailed report. The overall U.S. cattle herd on July 1 was the smallest since at least 1973 after a drought in the Southern Plains last year spurred ranchers to cull herds.

“Last August, we had just really heavy placements because of the drought in Texas, Oklahoma, and New Mexico,” Troy Vetterkind, the owner of Vetterkind Cattle Brokerage LLC, said in a telephone interview. “Overall cattle numbers are down compared to a year ago, and certainly there’s overall less cattle to place.”

Feedlot operators 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 1,200 pounds, when they are sold to meatpackers.

Feedlots sold about 1.96 million animals to meatpackers last month, down 4.5 percent from a year earlier, the USDA said. Analysts expected a 1.6 percent decline, on average.

Fattened cattle futures for December delivery were little changed at $1.281 a pound at 12:50 p.m. on the Chicago Mercantile Exchange. The price climbed 5.5 percent this year through yesterday.

Feeder-cattle futures for October settlement gained 0.2 percent to $1.4695 a pound, and the commodity was down 1.4 percent in 2012 before today.

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