July 20, 2011

 

US cattle futures rise despite heat wave

 

 

US live cattle futures rose on a weaker dollar and rising corn prices despite lingering concerns that hot summer weather will temper beef demand while boosting supplies.

 

Cattle for August delivery rose 0.75 cent, or 0.7%, to US$1.106 a pound in trading at the Chicago Mercantile Exchange. The CME October contract rose 0.8 cent, or 0.7%, to US$1.167 a pound. August feeder cattle futures rose 1.67 cent, or 1.2%, to US$1.363 a pound.

 

Corn rose 25 3/4 cents, or 3.7%, to US$7.22 a bushel in trading at the Chicago Board of Trade after a government report revealed lower-than-expected crop ratings. Higher corn prices typically support cattle futures since producers have more costs to pass onto meat packers. Higher feed prices also deter producers from increasing animal supplies by growing their herds.

 

Commodities also rose broadly on growing confidence that Europe will stabilize debt troubles in Greece and head off a crisis there. The improving sentiments about the euro zone pushed down the value of the dollar, which is supportive future prices. Dollar-denominated commodities often rise as the greenback falls since foreign buyers gain purchasing power.

 

Cattle futures also rose despite an ongoing summer heat wave that's spreading hot temperatures across the South and Midwest. Hot summer weather typically weighs on the cattle complex since consumers favor lighter meals instead of grilling, and cattle producers struggle to keep animals from overheating or slowing their weight gain.

 

Ranchers in the South, especially, are feeling the pressure of higher temperatures and one of the worst droughts in decades. As of last week, 94% of pasture lands in Texas were rated poor or very poor. Cattle producers there have been forced to haul in hay and water, ship animals out to pasture lands elsewhere, or sell off more cows.

 

Initial asking prices in Texas and Kansas are expected to be mostly US$1.12 a pound. Bids have not been established yet and may not be until later today or early Wednesday.

 

Sales in Texas and Kansas last week were reported from US$1.10-US$1.11 a pound. In Nebraska, sales last week were from US$1.11-US$1.115 a pound live and US$1.77 to mostly US$1.78 dressed with some at US$1.80.

 

USDA's choice boxed beef prices on Monday (Jul18) rose 21 cents to US$181.09 a hundred pounds and select fell US$1.47 to US$173.04 a hundred pounds.

 

The latest HedgersEdge packer margin index is plus US$30.60 a head, compared with US$15.75 the previous day. This is an estimate of packer returns on the cattle they slaughter and process expressed in the form of an index.

 

Tuesday's (Jul 19) cattle slaughter is projected to be about 129,000 head.