September 14, 2010

 

Cattle futures go up as low beef price spurs US demand

Cattle futures hit US$1 per pound on speculation that grocer demand for US beef is increasing after the wholesale price dropped.

 

According to the USDA, wholesale choice beef was unchanged at midday at US$1.5942 a pound, the lowest since August 19. Prices slumped following the US Labor Day holiday on September 6, when many consumers grilled outdoors. Meatpackers shipped 17.5 million pounds of choice beef last week, the most in three weeks, USDA data show.

 

"As prices go down, we're starting to see a little increase in demand," said Mark Schultz, the chief analyst at Northstar Commodity Investment Co. in Minneapolis. Beef buying "has picked up after two to three weeks of pretty pathetic movement," he added.

 

Cattle futures for December delivery, the most-active contract by open interest, rose 0.4%, to close at US$1.00375 at 1 p.m. on the Chicago Mercantile Exchange. Earlier, the price reached US$1.012, the highest level for a most-active contract since September 30, 2008.

 

Futures for October delivery climbed 0.3% to US$0.9745. Feeder-cattle futures for October settlement rose 0.5%, to US$1.12375 a pound. Last week, the price dropped 2.8%, the most since November, as corn prices jumped.

 

Cattle futures were supported by a US equity rally and the dollar's slide, said Jim Clarkson, an analyst at A&A Trading Inc. in Chicago. The Standard & Poor's 500 Index climbed as much as 1.3%. The greenback dropped as much as 1.1% against a basket of major currencies, improving prospects for US meat exports.

 

"It's a 'commodity up' day. Everything was higher this morning, and cattle went with it," Clarkson said.

 

Hog futures for December settlement fell 0.5%, to US$0.743 a pound. Earlier, the price touched US$0.74, the lowest level for a most-active contract since August 12. Futures have gained 13% this year.

 

On September 10, wholesale pork, known as the cutout, slumped to US$0.8985 a pound, a four-week low. The price has dropped 7.1% from a record on August 24.

 

"If hogs show any firmness in cutout or cash, I say buy the pigs. They're undervalued in futures," Northstar's Schultz said.

 

Hog futures for October settlement, the contract closest to expiration, dropped 1.2%, to US$0.763 a pound. The price was at a discount of US$0.46 cents last week to the CME's Lean Hog Index, a spot-market gauge.