September 20, 2010

US cattle rise on lower beef supply

Cattle futures rose to the highest level in almost two years on signs of lower supplies available to US beef processors.

Steers in Texas and Nebraska, the largest cattle-producing states, traded for almost 98 cents a pound earlier, about 1 cent higher than last week, USDA data show. Tight supplies are spurring meatpackers to slaughter cattle at lower weights, reducing overall beef output, analysts said.

Cattle futures for December delivery climbed 0.5 cent, or 0.5%, to close at US$1.0195 a pound at 1 p.m. on the CME. Earlier, the price reached US$1.0265, the highest level for a most-active contract since September 26, 2008. The commodity has gained 18% this year as beef supplies shrank and demand recovered from the recession.

Feeder-cattle futures for November settlement fell 0.425 cent, or 0.4%, to US$1.1235 a pound.

Steer carcasses weighed an average 879 pounds (399 kilogrammes) in the week ended September 12, or 2% less than the same week last year, according to the USDA.

Increasing feedlot supplies may pressure cattle futures next week, analysts said. After livestock markets closed in Chicago, the USDA reported that feedlots boosted cattle purchases by 7.1% in August from a year earlier.

Meanwhile, hog futures for December settlement rose 0.125 cent, or 0.2%, to 75.95 cents a pound. The price has climbed 16% this year.

The CME's Lean Hogs Index, a gauge of spot-market prices, rose 0.1% on Friday (Sep 17) to 82.92 cents a pound, more than 5 cents above October futures, the contract closest to expiration. According to USDA, meatpackers is expected to have processed 2.164 million hogs this week, 6.4% less than the same time last year.

Farmers culled herds after losing money in 2008 and 2009 on the heels of the recession, high feed costs and swine flu. Wholesale pork prices have rebounded 60% in the past year to 91.14 cents a pound, according to the USDA.