Monday September 01, 2014




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U.S. live cattle up as placements tumble

High corn prices beginning to trim feeding interests

U.S. live cattle futures closed higher on Monday following Friday's U.S. Department of Agriculture's (USDA) cattle-on-feed report that showed cattle placed in feedlots in September at a 16-year low, analysts and traders said.

Feeder cattle futures were lower on waning demand for young cattle due to the lack of profit in the feeding business and on firmer Chicago Board of Trade corn prices.

Traders said the worst drought in more than 50 years in the United States over the summer and the resulting high corn prices were impacting the cattle feeding industry.

Friday's government report showed cattle placed on feed, at just over 2.0 million, were below expectations and the smallest for the month of September since the USDA began keeping track of the data in 1996.

Chicago Mercantile Exchange spot October cattle futures closed up 0.100 cent per lb to 126.400 cents, most actively traded December ended unchanged at 127.275 and February was up 0.300 cent at 131.300 cents.

Spot October feeder cattle closed down 0.475 cent at 145.675 cents per lb. Most-actively traded November ended at 147.750 cents, down 0.625 cent.

The nearby months for live cattle futures weakened on spreads with the deferred contracts due to heavy weight cattle coming to market and bearish marketings data in Friday's report.

"The back months found support from the placements number while gains were capped in the front months by the disappointing marketings," said Dennis Smith, a broker for Archer Financial.

Also, "cattle are still going to market at record heavy weights," Smith said.

The average weight of cattle slaughtered last week was estimated by USDA at 1,320 lbs, compared with 1,316 the prior week, and 1,293 a year earlier.

In Friday's report, USDA said the number of cattle sent to market in September totaled 1.598 million head, down 12 percent from 1.813 million a year earlier. Analysts expected a 10 percent reduction.

The number of cattle on feed at 10.647 million was nearly equal to the year-ago population while analysts had expected a 2.2 percent decline, an additional bearish factor for the nearby cattle futures contracts.

Analysts and traders said Friday's strong cash cattle market lent support to nearby futures contracts and the cattle-on-feed report boosted the back months.

But Smith said he was cautious about the direction of cash cattle this week.

There were no cattle deliveries reported by the CME on Friday and investors were awaiting the tally of cattle available for sale this week.

USDA's boxed beef report on Monday showed choice wholesale carcasses valued at $198.02 per cwt, up $1.34, and select beef at $180.70, up $0.25.

The average packer margin on Monday was a negative $14.30, compared with a negative $9.90 on Friday and a minus $32.40 a week ago, according to HedgersEdge.com.

USDA reported the cattle slaughter on Monday at 125,000 head, down from 126,000 a week ago and down from 127,000 a year ago.

Analysts on average were expecting Monday's cold storage report to show September beef stocks at about 423.6 million lbs, compared with 429.8 million in August and 427.6 million during September a year ago.

Live hogs under pressure

Live hog futures closed lower on big slaughter numbers and ahead of the U.S. government's cold storage report at 2:00 p.m. CDT (1900 GMT).

December hogs closed down 0.950 cent per lb at 78.675 cents. February ended at down 0.525 cent at 85.175 cents.

"It looks like the cash markets could be weakening. The slaughter numbers aren't dropping so that's putting some pressure on them as well," Smith said.

Iowa/southern Minnesota hogs were steady on Monday at around $62 per cwt delivered to packing plants and the Illinois market also was steady.

Cash hog dealers said the supply and demand were about on balance, leaving little incentive to aggressively buy the futures market but it also was keeping away extensive liquidation of long positions.

Ahead of Monday's USDA cold storage report, the analysts' average forecast for pork inventories last month was 620.3 million lbs, compared with 580.8 million in August and 491.9 million a year ago.

The average packer margin was estimated on Monday at $7.80, compared with $3.10 on Friday and $4.70 a week ago, according to HedgersEdge.com.

USDA reported the hog slaughter on Monday at 435,000 head, up from 433,000 a week ago and up from 427,000 a year ago. (Reporting by Theopolis Waters, Alyce Hinton and Sam Nelson in Chicago.)



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