By Benjamin Parkin

Feedyard operators are fattening more cattle than previously anticipated, likely meaning larger supplies in the months to come.

The U.S. Department of Agriculture said Friday that producers placed a little over 2 million head of cattle in feedyards for fattening in January, 4% above a year earlier. Analysts had on average expected an increase of around 1%.

That pushed the total number of cattle to 11.6 million head as of the beginning of February, 8% above the same time last year and also ahead of pre-report estimates. Cattle marketed in January, or sent to slaughterhouses, rose in line with expectations at 6%.

The rate at which cattle ranchers have sent their herds to feedyards, to finish them on an intensive diet of grain, has consistently surprised market observers in recent months. Factors like a drought in the southern Plains--which depleted wheat pasture available for grazing--contributed to the trend, the USDA said.

Higher placements are due to translate to larger-than-expected supplies in the months to come, which could pressure cash-market prices for physical cattle and the futures market.

February-dated live cattle futures fell 0.3% to $1.28 a bushel at the Chicago Mercantile Exchange ahead of the report.

In a separate report Friday morning, forecasters from the USDA said they expected growing cattle herd sizes in 2017 to translate into higher beef production in 2018. But the rate of herd growth would likely slow this year, they said, which could help curb beef supplies next year.

Market analysts say robust export demand is essential in absorbing the extra beef production, and the USDA expects sales abroad to increase this year. But the agency added separately on Friday that beef export sales of 9,300 metric tons in the week ended Feb. 15 were down 10% from a week earlier and over 50% below the most recent four-week average. That was a low for the season so far.

Hog futures rose, ending the week 5% higher after tumbling to a low in mid-February. April lean hog contracts climbed 0.1% to 71.375 cents a pound. The cash market for physical hogs has slid this week, but wholesale pork prices have steadied.

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

(END) Dow Jones Newswires

February 23, 2018 16:24 ET (21:24 GMT)

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