January 4, 2011

 
US cattle futures trade get mixed prices
 

US cattle futures are narrowly mixed on Monday (Jan 3) on assumption that foreign and domestic beef demand will remain firm.

The February contract recently traded US$0.02 a pound, or 0.18%, lower at US$1.0815 while the April contract was off US$0.02, or 0.18%, at US$1.12. January feeder cattle was up US$0.047, or 0.39%, at US$1.2235, and March was up US$0.032, or 0.26%, at US$1.2427.

Beef markets remain key to futures and cash price movements, having risen about 2.69% last week at a time of the year when prices often decline, brokers said.

Grain markets also will continue to be a top priority for cattle traders, and wheat may take centre stage as dryness continues in the Plains and flooding continues in Australia, said Mike Zuzolo, analyst-broker at Global Commodity Analytics.

As long as China's stocks keep moving higher to signify a strong economy there, wheat keeps going up, and consumer demand for beef holds, then any dips in live cattle and feeder cattle futures may be seen as buying opportunities by futures investors, Zuzolo said.

Rich Nelson, livestock market analyst at Allendale Inc., said speculators may take the beef markets into account along with Friday's (Dec 31) higher close and try to take prices to new 27-month highs. Profit taking could show up at those highs because of speculation that beef may not keep rising now that the holidays are over.

Choice wholesale beef prices were quoted up US$0.37 a hundred pounds Thursday (Dec 30) by USDA, adding to gains made all week. Select beef was up US$0.75 at US$157.19. The volume of steaks and roasts sold was 137 loads, and there were 40 loads of trimmings and coarse grind product reported.

The latest HedgersEdge packer margin index is a minus US$22.55 a head. This is a rough estimate of packer returns on the cattle they slaughter and process expressed in the form of an index.

Some traders wondered if packers would not cut back on their slaughter rates in early January since plant profits are sinking. The companies typically do not respond to questions about slaughter rates, but many other traders speculated that last week's rising beef markets and higher cash cattle markets signal that packers have a good volume of beef orders to fill, and that they will be back in the cash market this week to buy aggressively again.

The USDA estimated slaughter Thursday (Dec 30) at 130,000 head, up from 129,000 a week earlier and up from 101,000 a year ago. Week-to-date slaughter was pegged at 519,000 head, unchanged from a week earlier but ahead of the 477,000 of a year ago.

Urner Barry's Yellow Sheet, a trade publication, Thursday (Dec 30) said beef prices were higher on most items. End cuts were particularly firm, but some middle meats were unsettled.