Reviving US feedlots 'make grab for cattle'

Feedlot operators, boosted by a revival in profitability, last month bought up more than 1.9m cattle  to fatten up for slaughter in a bid to cash in on a booming beef market.

Official data due on Friday will show the number of cattle placed on US feedlots rising last month by 6.6%, or about 120,000 head, compared with March last year, analysts believe.

The increase will more than make up for the rise in the number of animals feedlots sold for slaughter, expected to have risen by 4.9%, as operators rushed to cash in on a rising beef market.

"The report is expected to cattle placed in feedlots with expand for the first time in many months," said broker US Commodities.

Analysts at Illinois rival Allendale said that the report would "mark a change in the supply flow", after a period when "discouraged" operators cut numbers.

"Friday's report will put an end to that," the broker said.

Bright prospects? 

US beef prices have hit their highest levels since the summer of 2008, boosted by the impact of economic recovery on demand both in the domestic and export markets.

Consensus forecasts for USDA Cattle on Feed report (range of estimates)

On feed as of April 1: 97.1, (96.3-98.6)

Placements during March: 106.6, (102.2-111.0)

 Marketings during March: 104.9, (101.7-106.5)

Source: Reuters. Data expressed as % of total a year ago

This in turn has lifted prices of fed cattle, which have jumped by more than a quarter to some $1 a pound in the last four months.

While this is not all good news for feedlots, which are having to pay more for their placement stock, the rally, coupled with weak grain prices, has turned feeding margins positive for the first time in two years.

And prospects appear to remain rosy.

US Commodities said: "The beef market and packer margins remain strong. This gives the belief that cattle will trade at least steady."

The US Department of Agriculture forecast, that with beef supplies tightening globally, "the subsequent reduction in beef imports to the US, along with stronger demand for beef, is expected to ratchet beef prices higher throughout the year".

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