The nation’s beef producers scaled up feedlot placements for the third consecutive month in May as the highest cattle prices in almost two years bolstered profits.

Feedlot placements in Texas and other top cattle states rose by 22.3 percent last month, from 1.638 million head during May 2009, according to the average analyst estimate in a Dow Jones Newswires survey.

USDA is scheduled to release its next monthly Cattle on Feed report Friday at 2 p.m. Central time.

Cattle prices soared earlier this spring as the U.S. herd shrank to the lowest level in six years, forcing meatpackers to bid more aggressively. The price rally restored feedlot profits following nearly three years of losses stemming from a recession that cut beef demand.

As the economy slumped last year, feedlot placements in May 2009 sank to the lowest level on record for that month, according to USDA data.

“You’re comparing placements with a very low number historically,” said Elaine Johnson, an analyst with CattleHedging.com in Westminster, Col. “Profitability has improved tremendously” since last year, she said.

The projected 22.3-percent rise in May placements would rank as the second-biggest year-over-year increase ever, based on USDA records going back to 1996. In April 2003, placements rose 27.8 percent from the same month a year earlier, the largest percentage increase on record.

In May 1997, placements surged 19.7 percent, the biggest increase on record for that month, according to USDA data.

Cash prices for slaughter-ready steers topped $101 per hundred pounds earlier this spring, the highest in almost two years.

High prices helped lift profits for Southern Plains feedlots to an average of $91 per animal in May, according to Jim Robb, director of the Livestock Marketing Information Center. In May 2009, feedlots lost an average of $57 a head.

In Chicago futures trading, live cattle reached $1.002 a pound April 9, up 27 percent from a 3 ½-year low of 78.7 cents in December, based on the closest-to-expiration contract. Live cattle futures averaged about 80.8 cents a pound in June 2009.

“Cattle prices were weak a year ago and feedlots were running deep in the red,” said Marty Foreman, an analyst with Doane Advisory Services. “Hence, the sharp cut in placements.”

Foreman estimated a 19-percent increase in placements during May. That would put placements near the average of 1.965 million head for the previous five years, he said.

Rising feedlot placements in recent months signals higher beef supplies six to eight months ahead, analysts said, and also suggests beef producers are shifting toward expansion after trimming herds the past two years.

“Beef supplies are going to be more adequate than was earlier assumed,” said Johnson, the CattleHedger.com analyst.

However, a slide in cattle prices over the past month may have cooled expansion sentiment, while high unemployment has stirred concern that many consumers will forgo costlier foods, such as steaks.

Several analysts expect the total number of cattle on feed as of June 1 to be little-changed from 10.41 million head a year earlier. Johnson estimated on-feed inventories rose 1.1 percent.

In late trading today, August live cattle futures fell 0.3 cent to 88.875 cents a pound, down from a contract high of 95.55 cents May 11.

In another closely-watched figure tracked by the USDA, analysts estimate cattle marketings during May fell 3 percent to 4.9 percent from 1.952 million a year earlier.