U.S. Feedlots Buy 19% Fewer Cattle as Feed Costs Lower Profits
U.S. feedlots bought 19 percent fewer cattle in September than a year earlier amid tight animal supplies and as rising feed costs brought on by the worst drought in 56 years curbed profitability prospects.
Feedlots bought 2.004 million head of young cattle last month, down from 2.469 million in September 2011, the U.S. Department of Agriculture said today in a report. Purchases were the fewest for any September since the USDA began tracking the figure in 1996. Twelve analysts surveyed by Bloomberg News projected a 15 percent decline, on average. The feedlot herd totaled 10.989 million as of Oct. 1, down 2.6 percent from a year earlier. Analysts expected a 2.1 percent decline.
The price of corn, the main ingredient in livestock feed, was up 18 percent this year through yesterday after the government projected the U.S. harvest will be the smallest in six years, as hot, dry weather eroded yields. High feed costs mean feedlots probably lost about $130 a head on cattle sold in September, Rich Nelson, chief strategist for Allendale Inc. in McHenry, Illinois, said in a telephone interview.
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 1.598 million animals to meatpackers last month, down 12 percent from a year earlier, the USDA said. Analysts expected 10 percent decline, on average.
Fattened cattle futures for December delivery declined 0.4 percent to $1.27475 a pound at 12:09 p.m. on the Chicago Mercantile Exchange. The price was up 5.4 percent this year through yesterday.
Feeder-cattle futures for January settlement fell 0.1 percent to $1.505 a pound, and the commodity dropped 1.2 percent in 2012 before today.
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