December 11, 2009

US cattle futures down alongside beef demand

US cattle futures fell on Wednesday (Dec 9) with several futures contracts setting contract lows in light trading amid falling beef and cattle prices due to soft demand.

In Chicago's pit trading the December cattle futures <2LCZ9> dipped to 79.175 cents per pound, the lowest for a lead contract in six months, while the Globex December <LCZ9> dipped to 79.1 cents, the lowest since June 2006.

A snowstorm outside the Chicago Mercantile Exchange (CME), as well as in much of the Midwest, made for light trading as many traders stayed home. Also, the order flow into Chicago was light as the snow disrupted cash markets in Kansas, Nebraska, and Iowa.

Despite the weather, the weak economy appeared to be the primary driver for Wednesday's selling as it had slowed beef sales. Cash beef prices were quoted lower at midday on Wednesday, with the wholesale choice price the lowest since mid-October.

Beef is not holding well as beef demand is not strong enough, said Dennis Smith, livestock broker for Archer Financial.

In addition to lower beef prices, a few cattle traded from US$78 to US$80 per hundredweight in Wednesday's cash markets, which was down several dollars from the previous few weeks.

Some investors viewed the storm as bearish for cattle in that it may slow beef sales by keeping consumers away from restaurants and supermarkets.

December live cattle <2LCZ9> closed down 1.675 cents at 79.2 cents per per pound, while February <2LCG0> was off 1.2 cents at 81.925 cents.

Feeder cattle followed the lead of live cattle and finished lower. Lower prices for fed cattle, as well as losses by feedlot operators, could hurt demand and prices for feeder cattle, traders said.

The January feeder contract <2FCF0> closed down 1.000 cent at 91.05 cents per peround and March <2FCH0> dropped 1.225 to 91.925 cents.