By Benjamin Parkin 
 

The number of U.S. cattle being fattened for slaughter rose above expectations in June, according to government data, adding to supply pressure in the futures market.

In a report released after markets closed, the U.S. Department of Agriculture said the total number of cattle on feed in commercial feedlots rose to 10.8 million head as of July 1, up 4% from 10.4 million the same time last year. Analysts surveyed by The Wall Street Journal had anticipated a 3% increase.

Cattle prices on the cash and futures markets have fallen since early June as supply increased. Strong demand allowed feedyards to offset some the growth and keep a handle on prices for much of the spring, but those markets have trended lower as appetite for beef slides in the summer heat.

"The cattle on-feed report will be considered extremely bearish," said Jeff French of Top Third Ag Marketing in Chicago.

Cattle placed in commercial feedlots in June, an indication of supply in the months to come, rose 16% from year-ago levels, well above analyst expectations. Mr. French said a drought in the Dakotas, which has dried out grazing land, forced ranchers to send more cattle to feedlots.

Meanwhile, the number of cattle sent to slaughterhouses, or marketed--a sign of how quickly that supply is being absorbed--rose a little below average estimates at 4%. Trey Warnock, an analyst at Amarillo Brokerage in Texas, said swift processing of cattle could support the futures market despite the prospect of swelling supply in the months to come.

Live cattle futures for August delivery at the Chicago Mercantile Exchange rose 0.5%, to $1.16425 a pound on Friday, but ended the week lower. Contracts for feeder cattle, which haven't been fattened for slaughter yet, also rose.

In a second report, the USDA put the total cattle-and-calf inventory as of July 1 at 4% above the same time in 2015, while the calf crop in 2017 is expected to be 6% higher than two years ago. The agency didn't conduct a survey last year.

High profitability in recent years, partly a function of high meat prices and low feed costs, encouraged ranchers and feeders to expand their herds. Falling prices cut into those profits, said Scot Miller, head of brokerage Scot A. Miller and Associates in Montana, but herds have continued expanding.

"We're going to have adequate or larger supplies of cattle," Mr. Miller said.

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

(END) Dow Jones Newswires

July 21, 2017 16:42 ET (20:42 GMT)