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Feedlots Buy Fewer Cattle on Smaller Supply as Feed Costs Gain

Dec. 21 (Bloomberg) -- U.S. feedlots bought 5.6 percent fewer young cattle in November compared with a year earlier as rising feed costs curbed profit prospects and supplies of animals declined.

Feedlots purchased 1.923 million animals last month, down from 2.037 million in November 2011, the U.S. Department of Agriculture said today in a report. Eleven analysts surveyed by Bloomberg News projected an 8.5 percent drop, on average. The feedlot herd totaled 11.328 million as of Dec. 1, down 6 percent from a year earlier. Analysts expected the inventory to be down 6.5 percent.

The price of corn, the main ingredient in livestock feed, rose 15 percent in the 12 months through yesterday as the worst U.S. drought since the 1930s eroded yields and destroyed pastures. Feedlots probably lost about $118 a head on cattle sold in November, Rich Nelson, the chief strategist for Allendale Inc. in McHenry, Illinois, said in an e-mail.

“Tightening feeder-cattle supplies as well as negative feeding margins contributed” to the decline in purchases of young cattle, Elaine Johnson, an analyst at Cattlehedging.com in Westminster, Colorado, said in an e-mail before the report.

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 1.761 million animals to meatpackers last month, down 0.7 percent from a year earlier, the USDA said. Analysts expected 0.3 percent increase, on average.

Fattened-cattle futures for February delivery rose 0.1 percent to $1.33675 a pound at 12:56 p.m. on the Chicago Mercantile Exchange. The price was up 9.9 percent this year through yesterday.

Feeder-cattle futures for March settlement rose 0.1 percent to $1.5505 a pound, and the commodity advanced 4.1 percent in 2012 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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