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More cattle to feedlots

08/18/2011 @ 11:17am

CHICAGO (Dow Jones)--The U.S. Department of Agriculture is expected to report an increase in cattle sent to U.S. feedlots in July compared with a year ago, a sign that beef supplies will grow sharply later this year and then tighten in 2012.

The USDA will release the new data in its monthly cattle-on-feed report, due out Friday at 3:00 p.m. EDT (1900 GMT).

Brokers expect the data to show a surge in placements across the plains where cattle producers are shrinking their herds in the face of a severe drought. Those animals will be slaughtered in the months ahead, increasing supplies in the late fall and early winter.

The USDA will report 2.05 million head of young cattle, known as feeders, were placed in U.S. feedlots last month, according to the average prediction of 12 analysts and traders in a Dow Jones Newswires survey. If the average prediction is correct, the number of cattle added last month would be 16.9% above the same month a year ago, and 15.8% above the five-year average.

The survey pegged the number of cattle exiting feedlots for slaughter markets, known as marketings, at 1.833 million head for July, 3.7% below the same month a year ago and 6.7% below the five-year average.

Analysts on average estimated there were a total of 10.613 million head of cattle in U.S. feedlots on Aug. 1, 7.5% above the level from a year ago and 5% above the five-year average.

Driving the increased placements continues to be a deep drought in the southern Plains that has made water and grazing lands for cattle scarce. The Texas Cattle Feeders Association estimates placements in Texas, Oklahoma and New Mexico for July were 52.5% higher than a year ago.

The surge in placements is expected to disrupt historical supply patterns by sharply boosting beef supplies for the rest of the year and then, as producers find themselves with fewer animals to sell, tightening supplies in early 2012. The breeding herd also has been shrinking, as producers sell young females, or heifers, instead of holding them back for breeding.

The drought conditions have more recently moved northward into states like Kansas and Colorado, pressuring additional producers, said John Ginzel of Linn Group, a brokerage.

The "drought that has dominated the Southwest for several months moved into the Midwest last month, which in turn very likely forced many ranchers to sell many younger animals well ahead of schedule," said Dan Vaught, president of Vaught Futures Insights.

The prolonged heat waves across cattle-raising states this summer have also made it harder for cattle on feedlots to gain weight efficiently. That has encouraged managers to hold onto animals longer than expected, causing a drop in cattle sales, or marketings, in July compared with a year ago, analysts said.

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

(END) Dow Jones Newswires

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