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Fewer cattle headed to feedlots?

12/15/2011 @ 10:00am

The U.S. Department of Agriculture is expected to report a drop in the number of cattle sent to U.S. feedlots in November compared with a year ago, the latest evidence of a yearlong drought in the southern plains that will eventually lead to tighter beef supplies.

The USDA will release the data in its monthly cattle-on-feed report, due out Friday at 3 p.m. EST.

A majority of brokers and analysts expect the federal data to show a decline in the number of placements, or young cattle sold to feedlots for fattening. The USDA will report 1.95 million head of young cattle, known as feeders, were placed last month, according to the average prediction of 11 analysts and traders in a Dow Jones Newswires survey.

If the average is correct, the number of cattle added last month would be 0.4% below the same month a year ago and 0.8% below the five-year average.

Cattle producers in the U.S. Great Plains have spent much of the past year shrinking their herds as a devastating drought has left them with limited land on which to graze their animals. Placements, as a result, surged earlier this year as owners rushed to sell, in many cases ahead of schedule. Now that they have fewer animals remaining to sell, analysts expect placement rates to continue to fall steadily, eventually by a rate as much as 10% to 15% below prior-year levels.

In the Dow Jones survey, analysts pegged the number of cattle exiting feedlots for slaughter, known as marketings, at 1.75 million head for November, or 1.5% below the same month a year ago and 2.5% above the five-year average.

The rate of marketings in coming months could be difficult to pin down since many placements this year have been very young cattle, or those under 600 pounds. Feedlots added additional smaller animals in autumn earlier than usual as drought conditions spread north, causing herd liquidation in areas that had previously avoided the drought. Those cattle will take longer to reach slaughter-ready weights than animals that enter feedyards at standard weights, and managers have more flexibility in deciding how long to wait before selling them.

"They'll take longer to come out if they went in at 600 pounds than they would if they went in at 800 pounds," said Elaine Johnson, analyst at Cattlehedging.com.

Analysts on average estimated there were a total of 12.05 million head of cattle in U.S. feedlots on Dec. 1, which would be 3.7% above the level from a year ago and 3.3% above the five-year average.

"We've got a lot of cattle to move through the system," said Tom Leffler, president of Leffler Commodities LLC. He said an overriding risk for the industry early next year is the potential that beef demand could ease, including from export markets, just as more cattle are ready to be processed.

-By Marshall Eckblad, Dow Jones Newswires; 312-750-4070; Marshall.Eckblad@dowjones.com

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