Cattle Supply Growth Accelerates

Feed-yard operators placed more cattle in lots for fattening in December than expected, the U.S. Department of Agriculture said Friday, extending a months-long pattern of accelerating supply growth.

The agency said that feedlots placed 1.8 million cattle on feed in December, up 1% from a year earlier. Analysts surveyed by The Wall Street Journal had expected that figure to fall by around 3%.

Dry conditions in the southern Plains have depleted pasture and forced ranchers to offload herds to feed yards, which in turn placed those cattle on feed. The USDA's placement number has consistently exceeded expectations for several months, an indication of growing supplies.

"Generally we tend to start seeing placements lighten up a little bit here," said Craig VanDyke of Top Third Ag Marketing in Chicago. "But ultimately, with the dryness down in major cattle territory and no wheat pasture, you're starting to see guys put cattle on feed."

Total cattle on feed numbered 11.5 million as of Jan. 1, up 8% from a year earlier and in line with pre-report estimates. The number of cattle sent to slaughterhouses, or marketed, fell 1% in December, also in line with estimates.

The growing number of placements, a sign of slaughter-ready supply in the months to come, alongside a lower marketing number--an indication of how quickly the supply is being absorbed--could weigh on the futures market when it reopens on Monday, analysts said.

But traders also had more immediate cues to look to. The bulk of this week's cash trade for physical cattle hadn't happened as of early afternoon on Friday. Mr. VanDyke and other participants expected prices to rise slightly above last week's average of $123 per 100 pounds on a live basis. Whether or not they did could help determine Monday's futures direction.

As of early Friday afternoon, meatpackers were mostly bidding around $121 to $123, observers said, while feed yards were asking for $126 to $128.

Cattle futures rallied, in part spurred by anticipation of those higher physical prices. February-dated live cattle contracts rose 1.7% to $1.246 a pound at the Chicago Mercantile Exchange. The market earlier this week rose to the highest point in over two months.

Hog futures were slightly lower. The cash market was softening after starting 2018 on a strong note. Physical prices fell on Thursday and were expected steady to lower again on Friday.

CME February lean hog futures slid 0.3% to 72.275 cents a pound.

Write to Benjamin Parkin at benjamin.parkin@wsj.com

(END) Dow Jones Newswires

January 26, 2018 16:41 ET (21:41 GMT)