February 23, 2018 / 11:12 PM / 3 months ago

Dryness adds to bigger-than-expected U.S. cattle placements

    * January placements up 4.4 pct vs year ago
    * Feb. 1 feedlot cattle at 107.9 pct of year ago
    * January marketing up 6.1 pct vs last year
    * Report mildly bearish for CME live cattle futures

    By Theopolis Waters
    CHICAGO, Feb 23 (Reuters) - Ranchers moved 4.4 percent more
cattle into U.S. feedlots last month than in January 2017, the
U.S. Department of Agriculture (USDA) reported on Friday,
surpassing the high end of analysts' average forecasts.
    Analysts partly attributed the placement outcome to severe
drought in Texas and Oklahoma, along with continued dryness in
parts of the northern Plains, that forced cattle off winter
wheat grazing land. 
    Packers paid feedlots more for their cattle, which allowed
them to buy calves to fatten. And a growing number of heifers
entered feedyards - a sign of slowing U.S. herd expansion, said
analysts.
    Larger-than-expected placements of heavy weight cattle in
recent months imply bigger supplies around the late spring to
early summer time frame, according to analysts.
    On Monday, Friday's report may pressure Chicago Mercantile
Exchange live cattle        summer contracts, while front months
track near-term wholesale beef and cattle prices, said analysts.
    USDA's report showed January placements at 2.068 million
head, up 4.4 percent from 1.981 million a year earlier and 
above the average forecast of 1.989 million. 
    The government put the feedlot cattle supply as of Feb. 1 at
11.630 million head, up 7.9 percent from 10.782 million a year
ago. Analysts, on average, forecast a 7.4 percent increase.
    USDA said the number of cattle sold to packers, or
marketings, were up 6.1 percent in January from a year ago to
1.858 million head.
    Analysts had projected a 6.0 percent rise from 1.751 million
last year.
    The main issue with January's placement bump is drought in
the southern Plains, which likely included some heifers that
were originally intended as replacement animals, said North
Dakota State University economist Tim Petry.
    "We're going to moderate the increase in the U.S. cattle
herd anyway, and you throw in all this dry weather it would help
to further moderate that increase," said Petry.
    Mike Sands, independent market analyst, agreed that 
southern Plains dryness played a role in the rush of cattle into
feedlots. 
    However, Sands pointed out that placements in Corn Belt
states were steady to up slightly from a year ago, and most of
the placement increase came from cattle weighing over 700
pounds.
    "Maybe feeder cattle supplies aren't quiet as tight as
USDA's Jan. 1 inventory report suggested. Or profitably on the
cattle sold in January were pretty good, and it looks like
cattle feeders continued to be pretty aggressive at replacing
those cattle," said Sands.

 (Reporting by Theopolis Waters in Chicago; Editing by Cynthia
Osterman)
  
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