Slump in prospects dampen US cattle, hog market outlooks

 

 

US cattle and hog market bulls enjoyed a nearly-uninterrupted rally over the winter and first half of spring; now, the month of May threatens to rain on their parade.

 

Both cattle and hog futures in Chicago appear poised to establish near-term peaks and turn lower this month, some traders and brokers on the CME Group trading floor believe.

 

That is partly because by the middle of this month, meat processors are expected to have bought the cattle and pigs they need to satisfy demand for the May 31 Memorial Day holiday weekend. The holiday traditionally marks the start of the summer grilling season.

 

In trading earlier, the May lean hog contract rose 0.3 to 89.825 cents a pound, while June hogs rose 0.6 cents to 86.925 cents. The CME contract reflects carcass prices. Hog futures, based on the closest-to-expiration contract, rose 22% in April, the eighth-consecutive monthly gain.

 

Cattle traders were also eyeing the calendar and other big summer grilling holidays, including Fathers Day June 20. Meat buyers typically secure holiday-related supplies two to four weeks in advance, analysts say.

 

Analysts estimated June and August cattle futures would each decline to about 92 cents a pound by the beginning of June. June cattle futures rose 1.3 cents today to 95.525 cents a pound, while August rose 1.425 cents to 94.95 cents.

 

While cattle and hog rallies may lose some steam this month, traders note that key underlying fundamental factors - smaller herds, in particular - remain bullish.

 

As of April 1, cattle on feed in Texas and other top beef states totalled 10.77 million head, down 3.5% from a year earlier and the lowest for that date in six years, according to a USDA report last month.

 

The US and Canadian hog herd as of March 1 totalled 75.6 million heads, down 2.7% from a year earlier, USDA data showed. Wholesale beef and pork prices have soared 23% and 33% this year, respectively, as availability of slaughter-ready animals declined.

 

Meanwhile, choice grade boxed beef, a wholesale benchmark, earlier today averaged US$1.7063 a pound, the highest since July 2008, according to USDA figures. Wholesale pork cutouts values last week reached 90.71 cents a pound, also the highest since the summer of 2008.

The surge in wholesale beef and pork has yet to be fully reflected in supermarket prices, analysts say. With the economy still sluggish, a key question whether consumers would shun pricier steaks, chops and burgers.