By Benjamin Parkin

U.S. cattle supplies are growing faster than expected.

The U.S. Department of Agriculture said on Friday that the total number of cattle being fattened in feedlots as of March 1 rose to 11.7 million head, 9% above the same time a year earlier and above pre-report estimates.

The number of cattle placed into feedlots in February rose 7% from last year to 1.82 million head, well above average expectations of 4%. Cattle sent to slaughterhouses that month rose 2%, also above estimates.

Those figures suggested that cattle supplies are large and will continue to increase as more cattle reach their requisite slaughter weights in the months to come. Anticipation of large supplies has recently pressured the futures market.

But some analysts said that traders and meatpackers were already poised to absorb those growing supplies. The monthly placement number in particular has consistently come in above expectations in recent months, often with limited market impact.

"We've got more cows, we've got more calves, therefore we've seen more cattle placed on feed," said Trey Warnock, an analyst at Amarillo Brokerage. "Some of that is rather normal."

Live cattle futures for April delivery fell 1.8% to $1.1605 a pound at the Chicago Mercantile Exchange ahead of the report.

China's newly unveiled plan to levy tariffs on U.S. pork pressured livestock markets generally on Friday. Though beef exports to China are relatively small and unaffected by the duties, traders are betting that increased tension could be bad for U.S. agriculture more generally.

Futures are currently trading a significant discount to the cash market for physical cattle. Meatpackers this week mostly paid around $1.26 a pound for cattle to slaughter. The difference between futures and cash suggested that traders expected futures to fall sharply in the weeks to come, in large part because of the anticipated growth in supply.

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

(END) Dow Jones Newswires

March 23, 2018 17:13 ET (21:13 GMT)

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