U.S. feedlots brought in 18.0 percent more cattle in December than the year-earlier month, the U.S. Department of Agriculture said on Friday, which topped forecasts and reached a six-year high for that month.
Higher prices for slaughter-ready, or cash, cattle last month improved profit for feedlots. That allowed them to draw more animals off winter wheat grazing pastures in parts of the U.S. Plains, said analysts.
Some ranchers pulled heavy calves off pastures to avoid potential illness and death loss from the onset of wintry weather.
Additionally, more heifers entered feeding pens driven by the prolonged period of dwindling profit among cow/calf operators.
Cattle placed in commercial feeding pens last month could begin arriving at packing plants in June, which could pressure cattle prices at that time, said Allendale Inc chief strategist Rich Nelson.
USDA’s report showed December placements at 1.795 million head, a substantial increase from 1.527 million in December 2015. That was above analysts’ average forecast of 1.655 million and the highest for that month since 1.8 million in December 2010.
The government put the feedlot cattle supply as of Jan. 1 at 10.605 million head, about 100 percent of a year ago at 10.575 million. Analysts, on average, had forecast a 1.0 percent decline.
The government said the number of cattle sold to packers, or marketings, grew 7.0 percent in December from a year earlier, to 1.787 million head.
Analysts had projected a 6.7 percent rise from 1.674 million last year.
“We had a bullish trend occurring in December with cattle prices, and last month’s placements may have been the result of low placements in September and October,” said Nelson.
David Anderson, a Texas A&M University economist, attributed December’s huge placements to mild fall and early winter weather in parts of the Northern Plains, which kept a large number of cattle out on pasture due to supportive cattle prices.
“In early December, the situation changed and winter hit. It forced some ranchers to sell a lot of heavy calves,” said Anderson.
Friday’s report included quarterly numbers for heifers on feed as of Jan. 1 at 3.58 million head, up from 3.4 million a year ago.
This suggests slower herd expansion after cow/calf producers suffered a long stretch of lower profits, said Anderson.
Analysts viewed the report as bearish for CME live cattle on Monday because of the larger-than-anticipated placement outcome.