January 25, 2013 / 10:27 PM / 5 years ago

UPDATE 1-U.S. cattle placements fall for seventh straight month

* Jan. 1 feedlot cattle supply fall 6 pct yr-over-year
    * Dec placements down 1 pct yr/yr, trade expected rise
    * Marketings down 2 pct yr/yr, but 4.9 pct above estimate
    * Report called bullish for Monday's cattle futures

 (Adds analysts comments, context)
    By Theopolis Waters
    CHICAGO Jan 25 (Reuters) - The number of cattle placed in
U.S. feedlots fell in December from a year earlier, USDA data on
Friday showed, the seventh straight monthly decline in
placements and a sign that high feed costs continue to roil the
industry after the worst drought in half a century.
    The decline surprised some analysts, who had expected the
first monthly increase in placements since May.
    The U.S. Department of Agriculture reported placements down
1 percent from a year earlier at 1.664 million head. Analysts in
a Reuters poll, on average, expected a 3.8 percent increase,
which would have been the first increase since May.
    "This is one of the things that the trade was looking for to
be bearish, and the simplest way to put it is that it was
bullish across the board. The placements were quite a bit lower
than expected," said Ryan Ettner, broker at Allendale Inc.
    However, the report nearly matched Allendale's placement
estimate of 94.2 percent.
    USDA reported the U.S. feedlot cattle supply on Jan. 1 at
11.193 million head, or 94 percent of the year ago. Analysts
polled by Reuters, on average, expected 95.5 percent. 
    The government said the number of cattle sold to packers, or
marketings, in December was down 2 percent from a year earlier
at 1.745 million head versus the average forecast for a 6.9
percent reduction.
    Analysts viewed Friday's cattle report as bullish for
Chicago Mercantile Exchange live cattle futures on Monday, with
some analysts predicting the market could rise as much as 1.000
cent per lb.
    CME spot February live cattle on Friday settled at 126.300
cents, up 0.425 cent.  
    Analysts had expected the most-watched placements category
to be higher given persistent drought in the United States that
withered the wheat pastures that ranchers had hoped would get
their cattle through the winter.
    Also, corn prices moderated from record highs last summer as
the worst drought in more than 50 years devastated the crop,
which had analysts expecting a rise in placements.
   Last month, Chicago Board of Trade corn futures <0#Cc1:>
averaged $7.24-1/8 per bushel, the fourth highest on record due
to the drought hurting the crop. But, prices have since eased
from the Aug. 10 record high of $8.43-3/4 and were down for a
fourth straight month.   
    Months of losses on cattle sold to packing plants likely
discouraged feedyards from aggressively refilling pens with
younger calves.
    Feedlots in December on average lost $121 per head on cattle
that they fattened for sale to meat processors -- which was
roughly steady with losses in November. In December 2011, the
average loss was of $70 per head, according to the Denver-based
Livestock Marketing Information Center.    
    "Cattle feeding profitability has been quite disappointing
with feedlots operating deep in the red in the second half of
2012," said University of Missouri livestock economist Ron
    Also, he said the fairly aggressive placements of cattle 
earlier last year reduced the supply of feeder cattle available
to enter feedyards now.
    "The fact that placements were quite a bit lighter than a
year ago is bullish for spring-time live cattle futures and
confirms that these numbers are tight," said Plain.
    "Marketings were quite a bit higher than forecasts,
placements were down from expectations and the on-feed number
was supportive, I'd say it's a positive report for futures,"
said Plain.

 (Additional reporting by Michael Hirtzer; Editing by Bob

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