Bruce Blythe   |   Updated: November 16, 2011

The number of cattle sent to feedlots for fattening may have dropped last month amid high feed costs and limited supplies of young animals, signaling further tightness in beef supplies that will force consumers to pay even more for steaks and burgers next year.

Feedlot placements in top U.S. cattle states during October fell 3.9 percent from the same month in 2010, according to an estimate from Allendale, Inc., a McHenry, Ill.-based advisor. Analysts at the Livestock Marketing Information Center in Denver projected a 2.7-percent decline.

Livestock traders and analysts will scrutinize placements and other key supply figures in the U.S. Department of Agriculture next monthly Cattle on Feed update for cues on market direction over coming months. The report is scheduled for 2 p.m. Central time Nov. 18.

Allendale and the Livestock Marketing Information Center were among a majority of advisors surveyed who said placements declined in October after posting increases in three of the previous four months. That reflects severe drought in the Southern Plains that led to shrinking inventories of young cattle, known as feeders, and corn’s record rally that caused widening losses for feedlot operators.

Tight animal supplies and robust exports already sent prices for slaughter-ready steers to all-time highs earlier this month, and Troy Vetterkind, who runs Vetterkind Cattle Brokerage in Chicago, said the USDA probably will provide further bullish fuel for early 2012.

“The report will be constructive for the cattle market next spring as I think placements are finally starting to slow and marketing's remain strong as feedlots pull cattle ahead to keep up with export demand,” Vetterkind said in an e-mail.

Feedlot placements are an indicator of beef supplies in four to eight months, after cattle are fattened to slaughter weight of about 1,200 pounds. Cattle placed in feedlots during October will be sent to slaughter beginning around March, according to Allendale.

At least one analyst, Elaine Johnson of CattleHedging.com, LLC, projected higher placements for October. She estimated placements rose 1.1 percent from the 2.504 million head sent to feedlots in October 2010.

For feedlot managers, high feeder animal costs and expensive corn have muted benefits from record slaughter cattle prices.

At the close of trading Nov. 16, CME Group live cattle futures for December delivery rose 0.15 cent to $1.21875 a pound. April futures traded around $1.28. Cattle reached a record $1.25375 on Nov. 4, based on the closest-to-expiration futures contract.

In another closely followed number in the monthly USDA report, the total number of cattle on feed as of Nov. 1 is expected to be up 2.9 percent to 4.5  percent from 11.49 million head a year earlier, based on the three analysts’ estimates.

On-feed inventories rose above year-earlier levels in every month since June 2010, according to USDA data. But with feedlot inventories likely to tighten longer-term and the total U.S. cattle herd at a record low, consumers face even higher beef prices at the supermarket in 2012, analysts say.

In 2012, U.S. beef production is expected to drop 4.9 percent from 2011 levels, to 25.1 billion pounds, the lowest since 2005, according to a separate USDA report earlier this month. Retail beef and veal prices are expected to increase 8 percent to 9 percent this year and rise another 4.5 percent to 5.5 percent in 2012, according to a USDA forecast.

In 2010, retail beef prices rose 2.9 percent.

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