Cattle in US feedlots hits 16-year high in February as drought persists
Ranchers drove 7.3pc more cattle into U.S. feedlots in February than a year ago, the U.S. Department of Agriculture (USDA) reported on Friday, the most for the month in 16 years.
Persistent drought in the U.S. Plains withered winter wheat grazing pastures, which forced beef cattle into feedyards in states noted for growing corn such as Iowa and Kansas, said analysts.
“This is a dry weather story ... and not great news for the trade,” said Allendale Inc chief strategist Rich Nelson, regarding USDA’s placement result that was near the high end of the range of analysts’ forecasts.
Larger cattle numbers means more beef tonnage around the late summer and early fall period, said Nelson.
Another factor behind February’s placement buildup was that packers paid feedlots enough for their cattle to turn a profit, which allowed them to buy calves to fatten, analysts said.
Monday’s Chicago Mercantile Exchange live cattle futures may open lower based on Friday’s report, said analysts.
But substantial market losses on Friday, partly tied to trade war fears, might lessen some of the report’s bearish implications, said analysts.
Most of Friday’s futures sell-off was on worries about a potential trade war between the United States and China in addition to increased near-term supplies, said Nelson.