May 3, 2011

US cattle futures drops to lowest in six weeks

US cattle futures posted the largest one-day percentage decline in a week on Monday (May 2) to put the benchmark June contract at a six-week low as slowing beef sales had investors anxious to sell.

Wholesale beef prices dropped 2% last week and cattle slaughter was down 5.3%, indicators of slowing beef sales, traders said.

Hog futures pushed higher recovering a small portion of last week's losses and were helped by higher cash hog and pork prices on Friday (Apr 29) and forecasts for fewer hogs in the weeks ahead.

Cattle has been under pressure as a cool, wet April delayed the start of spring cookouts. Also, high gasoline prices may have slowed consumer spending, analysts said.

"The weather was poor right during the time when the peak grilling season started. Also, we started with more beef in storage than a year ago," said an analyst with US Commodities Inc.

The slowdown in slaughter last week was particularly bearish as it may indicate cattle are backing up in feedlots at a time when more of them will be reaching market weight, traders said. USDA estimated last week's slaughter at 615,000 head, compared with 649,000 a week ago and 662,000 a year ago.

Selling in June cattle futures accelerated near the close as funds bought August and sold June to move longs to the deferred contract.

June cattle 2LCM1 closed down 1.400 cents, or 1.24%, at 111.95 cents per lb and August 2LCQ1 closed down 1.175 cents, 1.02%, at 114.525.

Feeder cattle were pulled down by lower live cattle with May 2FCK1 down 0.850 cent, 0.64%, at 131.050 and August 2FCQ1 down 1.125 cents, or 0.83%, at 134.825.

Hog futures bounced back after being knocked lower last week, with Monday's (May 2) rebound helped by higher cash hog and pork markets, traders said. Hogs also should get a lift when Midwest fields dry out from the wet spring and crop planting starts, traders said.