Feedyards last month placed more cattle in lots for fattening than expected, according to a government report, raising expectations for larger herds next year.
Cattle placements rose 3% from a year earlier to 1.93 million head in August, the U.S. Department of Agriculture said. Analysts expected a 3% decline.
That was a jolt for those betting that beef supplies would ease early next year as those cattle are sent to slaughterhouses. Analysts have said futures traders will have to adjust their expectations, particularly after cattle futures rallied in part on anticipation of the decline.
The agency said that the total number of cattle on-feed as of Sept. 1 rose 4% from a year earlier to 10.5 million head, above expectations. Cattle marketed, or sent to slaughterhouses, in August rose 6% to 1.98 million head, in line with average pre-report estimates.
Analysts said the report would likely pressure cattle futures when markets open on Monday.
"Go to church twice this Sunday because cattle on feed was big-time bearish," said Craig VanDyke of Top Third Ag Marketing. "This is a worst case scenario."
In a separate report released Friday, the USDA said frozen stocks of red meat also rose more than expected. Total pork stocks in commercial freezers rose 4% from a month earlier to 575.7 million pounds, while beef stocks rose 10% to 476.3 million. Both were still below last year.
Supplies of pork bellies in cold storage, meanwhile, also rose 8% from a month earlier though they were 40% below last year. Belly stocks have been tight for much of this year on strong demand for bacon, sparking volatility in hog prices.
But analysts say record-high belly prices earlier this summer dampened demand, allowing some of those stocks to rebuild. A decline of over 50% in value since then hasn't trickled down to consumers yet.
Before the reports were released, October live cattle futures at the Chicago Mercantile Exchange rose 1.3% to a six-week high of $1.11575 a pound. CME October lean hog futures fell 2.8% to 55.7 cents a pound.
"There's nothing optimistic about what we saw," said Steve Wagner, a broker at CHS Hedging Inc. "The only thing that will hold this market from absolutely falling out of bed" was sharply higher cash-market prices for cattle. Meatpackers had paid $108 per 100 pounds as of Friday afternoon, up from around $106 a week earlier.
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(END) Dow Jones Newswires
September 22, 2017 16:45 ET (20:45 GMT)