Beef producers likely trimmed feedlot placements last month as soaring corn prices threatened profit, some analysts believe.
Feedlots placements in top U.S. cattle states during October may have dropped 1.5 percent from the 2.47 million head for the same month in 2009, says Elaine Johnson, an analyst with CattleHedging.com.
“Declining profits and prospects for higher feed prices are certainly the primary reasons” Johnson says. “Another is the tightening supply of available feeder cattle.”
A drop in October placements would mark just the second year-over-year decline in the past eight months. For much of this year, placements, which point to beef supplies six to eight months in the future, and on-feed numbers trended higher as rising cattle prices fueled beef producers’ profits.
USDA will release its next monthly Cattle on Feed Report this Friday at 2 p.m. Central time.
Beef industry profit prospects have clouded amid persistently high unemployment and a corn market rally that sent prices to 26-month highs above $5 a bushel. While cattle prices remain high, feedlot margins slipped into the red this fall, analysts note.
Feedlots lost an average of $3.40 per head on slaughter animals last month after losing $16 per head in September, according to estimates by Erica Rosa, an economist with the
Slaughter-ready steers on Oct. 21, reached $101.05 per hundredweight, the highest price since July 2008. Even after receding in recent weeks, prices remain about 17 percent higher than year-ago levels, according to USDA data.
Despite recent losses, feedlots were largely profitable this year after losing money for at least the previous two years. The outlook for even higher prices next spring may overshadow expensive corn and prompt some feedlot operators to boost placements.
In late trading today, April cattle futures in
Those kinds of prices are “offering feedlots some further encouragement,” says Marty Foreman, an analyst with Doane Advisory Services.
“While feeding margins are under pressure now, feedlots have been profitable through most of 2010,” he adds. “It was a year of recovery which was sorely needed after the industry incurred huge losses in 2008 and 2009.”
Next year is even more uncertain with corn stocks historically tight and feed costs rising. “Cattle feeders need more than one good year to recover the earlier losses,” Foremn says.
The total number of cattle on feed, another closely followed figure tracked by USDA, is expected to be up 2.3 as of Nov. 1, from 11.13 million head a year earlier, Foreman estimates.