The number of cattle sent to feedlots for fattening fell for the second consecutive month during November as expensive corn hurt beef producers’ profit margins, several analysts said.
Feedlot placements in top U.S. cattle states during November likely fell 0.7 percent from 1.96 million head in the same month in 2010, according to a survey of five analysts prior to the Agriculture Department’s next monthly Cattle on Feed update. The report is scheduled for 2 p.m. Central time Dec. 16.
Three of five analysts projected placement declines ranging from 1 percent to 2.5 percent, while the other two forecast increases from 0.3 percent to 2 percent.
Much like the lack of consensus among livestock analysts, there is little apparent trend in feedlot placements since summer. Placements rose compared with year-earlier levels in three of six months through October and fell the other three, according to USDA data.
But there are a couple things on which most analysts agree: Feedlot operators continue to be squeezed by high feed costs stemming from corn’s record rally earlier this year, while supplies of young feeder cattle are shrinking in the wake of severe drought in the Southern Plains.
Prices for slaughter-ready cattle rose to all-time highs last month, and the outlook for a strong market in 2012 has encouraged feedlot managers to maintain relatively high placements even amid expensive feed, analysts said.
High expected prices next year are encouraging feedlots to “bet on the come,” said Elaine Johnson, an analyst with CattleHedging.com in Westminister, Col. Additionally, a sharp drop in corn prices this fall has led to improved beef producer margins and many feedlots have excess capacity, she said.
“With prospects for further declines in feeder supplies looking forward everyone is competing to stay in the business,” Johnson said.
In trading Dec. 13, CME Group live cattle futures for February delivery were unchanged at $1.1865 a pound, while April futures settled at $1.228. Cattle reached a record $1.25375 on Nov. 4, based on the closest-to-expiration futures contract.
Feedlots absorbed losses on animals sold to meatpackers for the seventh consecutive month during November, based on industry-wide averages tracked by the USDA. Still, cattle prices have been high enough to allow many feedlots to turn profits, CME traders said. Combined with concern over tighter feeder supplies next year, feedlots continue to place young animals.