Jun 7, 2011

 

US cattle futures end lower as commodities decrease

 

 

US cattle futures closed lower on Monday (Jun 6) because strength in the dollar causes an extensive weakness in commodity prices.

 

Live cattle for August delivery, which is the most actively traded contract, settled down US$0.0177 cents, or 1.7%, at US$1.0332 per pound at the Chicago Mercantile Exchange. The June contract ended 1.7%, or US$0.0177, lower at US$1.024/pound.

 

Feeder cattle for August ended 0.1% lower at US$1.241 a pound after trading up as high as US$1.2612 a pound earlier in the day.

 

Driving the declines in cattle futures was the opinion among some market participants that Friday's (Jun 3) 1.5% price jump was too large. Providing further pressure was general weakness in commodities as grains and crude oil fell as the US dollar climbed. Strength in the greenback makes dollar-denominated commodities less attractive to foreign buyers.

 

"Cattle are not going to be immune to that," said an analyst.

 

Analysts said cattle futures, which set record highs in early April, may be finding a near-term bottom at around US$1.01-1.02 a pound. Futures have support from a technical and historical perspective at that level, but for prices to rebound traders will need support from the supply-demand fundamentals, said another analyst.

 

"The market would like to make a bottom," the analyst added.

 

Beef packers are enjoying wide margins as cash cattle prices have pulled back sharply, while wholesale beef price declines have been less severe. Yet market participants are concerned over whether retail beef demand can keep pace with the increasing supplies coming from processors.

 

The USDA boxed beef prices, which are a measure of wholesale prices, were lower at midday Monday (Jun 6). Choice beef prices were down US$0.55 at US$176.93 per hundred pounds and select prices were off US$1.14 at US$170.15 per hundred pounds on 183 total loads.

 

Cattle owners are hoping that wide beef processing margins will result in higher cash prices this week. Initial asking prices in the Texas Panhandle and Kansas are reported at mostly US$1.07 a pound. No bids have been reported there yet, and they may not be established until Tuesday (Jun 7). The majority of the sales there last week were at US$1.04 a pound with a few up to US$1.05 a pound in Kansas on Friday (Jun 3).

 

The latest HedgersEdge packer margin index was plus US$99.10 a head, compared with US$104.10 a head the previous day at nearly a three-year high. This is an estimate of packer returns on cattle slaughtered and processed expressed in the form of an index.

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