Chicago Mercantile Exchange (CME) live cattle futures slumped on Wednesday, as traders expected the US Department of Agriculture's monthly report on Friday to show more cattle were placed into feedlots in April than a year earlier, reported Reuters.
Concerns about potential weakness in US beef demand also weighed on futures. Strong consumer demand has helped push US beef prices to record highs this year, while the nation's cattle herd contracted to its smallest in 75 years.
Cattle inventories have dwindled due to a years-long drought that burned up grazing lands as well as a US ban on imports of Mexican livestock, intended to keep out the New World screwworm parasite.
A resurgence of drought across the Plains has encouraged producers to send more cattle to feedlots, analysts said.
A Reuters poll of analysts expects the USDA to report on Friday that placements into feedlots last month were up 3.4% from a year earlier. They estimate the US had 1.6% more cattle in feedlots as of May 1 than a year earlier.
"Herd rebuilding is supposed to limit the number of cattle going into feedlots," Steiner Consulting Group said. "But drought conditions worsened throughout April and combined with the strong prices paid for feeders, we think this was enough to push more cattle into feedlots."
CME June live cattle fell 1.275 cents to close at 253.275 cents per pound, though futures remain near a contract high set this month. August live cattle slid 1.950 cents to 245.300 cents per pound.
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