Feedlots Place 1.7% Fewer Cattle Amid Weak Profit Prospects

U.S. feedlots reduced the number of cattle added to their herds in May by 1.7 percent, a smaller decline than analysts projected, amid weak profit prospects.

About 2.049 million head of cattle were moved into feedlots last month, compared with 2.084 million in May 2012, the U.S. Department of Agriculture said today in a report. Twelve analysts surveyed by Bloomberg News projected a 5.3 percent drop, on average. The feedlot herd totaled 10.736 million as of June 1, down 3.1 percent from a year earlier. Analysts expected a 3.6 percent decline.

For the month of May, feedlots were losing $145 per head, according to Rich Nelson, chief strategist at Allendale Inc. in McHenry, Illinois, who cited USDA data. High costs for animals and higher-than-expected feed prices contributed to the losses, said Elaine Johnson, an analyst at Cattlehedging.com.

“Overall, the numbers were down just because the losses at the feedlot level are kind of concerning,” Johnson, based in Westminster, Colorado, said in an interview before the report. “The placements a year ago were big, and we’re just not seeing that this year.”

Feedlot operators typically buy year-old cattle that weigh about 500 pounds (227 kilograms) to 800 pounds, called feeders. The animals are fattened on corn until they weigh about 1,300 pounds, when they are sold to meatpackers.

Feedlots sold 1.948 million animals to meatpackers last month, down 3.4 percent from a year earlier and the second-lowest level for the month of May since the data series began in 1996, according to USDA. Analysts expected a 1.9 percent slide, on average.

Cattle futures for August delivery rose 0.3 percent to $1.20325 a pound at 9:45 a.m. on the Chicago Mercantile Exchange. The price declined 9.3 percent this year through yesterday.

Feeder-cattle futures for August settlement climbed 0.3 percent to $1.448 a pound. The commodity slumped 6.4 percent this year through yesterday.

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